Users of Accounting
Give an example of an internal user.
Someone who works within the company.
Guidelines for accounting (rule book).
Generally Accepted Accounting Principles (GAAP)
Requires items on financial statements to be measured in terms of the dollar.
Monetary Unit assumption
A business' money.
Cash
Earnings that result from the sale of goods or services.
Revenue.
Give an example of an external user.
Creditor, Investor, Businesses, etc.
International accounting guidelines.
International Financial Reporting Standards (IFRS)
Assumes the entity will remain in operation for the foreseeable future.
Going Concern assumption
Payment of an expense in advance.
Prepaid expense.
Cost of selling goods or services.
Expenses.
Licensed professional accountants who serve the general public.
Certified Public Accountant (CPA)
What does the Sarbanes-Oxley Act require?
Requires managers to take responsibility for integrity and completeness of financial statements.
What is historical cost?
Purchase price.
Promise made by the business to pay a debt in the future.
Accounts payable.
Written promise made by the business to pay a debt.
Notes payable.
What is a creditor?
Any person or business to whom a business owes money.
What does the Securities and Exchange Commission (SEC) oversee?
U.S. financial markets and FASB
What is the cost principle?
Assets should be recorded at historical cost.
Company receives cash from a product but has not provided the good or service.
Unearned revenue.
A customer's promise to pay in the future for services or goods sold.
Accounts receivable.
What is the difference between financial and managerial accounting?
Financial accounting provides information to external users. Managerial accounting provides information to users internal to the company.
Private organization that oversees the creation and governance of accounting standards.
Financial Accounting Standards Board (FASB)
Explain the economic entity assumption.
Organizations are a separate economic unit from their owners.
Written promise that a customer will pay a fixed amount plus interest by a certain date in the future.
Notes receivable.
Represents contributions of stockholders in the business.
Common stock.