Accounting Profession

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Public Corporation

A company whose shares are publicly traded and are usually held by a large number (hundreds or thousands) of shareholders

partnership

A type of business organization in which two or more individuals pool money, skills, and other resources, and share profit and loss in accordance with terms of the partnership agreement

Corporation

An entity such as a business, municipality, or organization, that involves more than one person but that has met the legal requirements to operate as a single person, so that it may enter into contracts and engage in transactions under its own identity

Stockholders

An individual, group, or organization that holds one or more shares in a company

"Cooking the books"

Falsification of accounting records to give a misleading picture of a firm's financial position or the results of its operations; an illegal practice

Private Corporation

Incorporated firm whose shares are not publicly traded, and are held by a small number of stockholders (shareholders)

private accounting

Perform accounting functions for a single business; involves setting up systems and recording business transactions that are aggregated into financial statements for one company

Bachelor's Degree

Post-secondary degree awarded to an individual after completion of undergraduate course work usually taking eight semesters and 120 credits to complete

SEC

Securities and Exchange Commission

public accounting

Sells accounting services to the general public; involves being an independent third party that examines the financial statements and supporting systems of client companies

pump and dump scheme

When someone holding a stock artificially drives its share price up by floating exaggerated or false reports of its value through Web sites, online postings

Global economy

World-wide economic activity between various countries that are considered intertwined and thus can affect other countries negatively or positively

merchandising business

a business dedicated to the purchase of finished goods and their resale for a profit

Financial statements

a collection of reports about an organization's financial results, financial condition, and cash flows

Generally Accepted Accounting Principles (GAAP)

a common set of accounting principles, standards and procedures that companies must follow when they compile their financial statements; aka "the rules"

Ponzi Scheme

a fraudulent investing scam promising high rates of return with little risk to investors; this pyramid scheme generates returns for older investors by acquiring new investors

White Collar Crime

a nonviolent crime committed for financial gain (i.e. securities fraud, embezzlement, corporate fraud, money laundering)

business

a person, partnership, or corporation engaged in commerce, manufacturing, or a service; profit-seeking enterprise or concern

Financial Accounting Standards Board (FASB)

a private, non-profit organization market regulator whose primary purpose is to establish and improve generally accepted accounting principles (GAAP) within the United States

Annual report

a publication issued to a company's shareholders, creditors, and regulatory organizations following the end of its fiscal year. The report typically contains at least an income statement, balance sheet, statement of cash flows, and accompanying footnotes

sole proprietorship

a type of business ownership in which someone owns an unincorporated business by himself or herself

certified public accountant (CPA)

an accounting professional who has passed the CPA exam administered by the AICPA and has fulfilled the educational and work related experience requirements for certification

Madoff scandal

an investment scandal masterminded by the former chairman of the Nasdaq, who also ran a hedge fund, that resulted in $65 million Ponzi scheme.

Audit

an objective examination and evaluation of the financial statements of an organization to make sure that the records are a fair and accurate representation of the transactions they claim to represent

manufacturing business

any business that uses components, parts or raw materials to make a finished good; these finished goods can be sold directly to consumers or to other manufacturing businesses that use them for making a different product

E-Commerce

commercial transactions conducted electronically on the Internet

Blue Collar Crime

crimes committed by an individual from a lower social class causing injury to person and property

penny stocks

high-risk stocks that typically sell for less than $1 per share when they are first offered

Employees

individuals who work for another person or for a company for wages or a salary

Sarbanes-Oxley (SOX) Act of 2002

legislation passed by U.S. Congress to protect investors from the possibility of fraudulent accounting activities by corporations; purpose: strict reforms to improve financial disclosures from corporations and prevent accounting fraud.

service business

provides intangible products, such as accounting, banking, consulting, cleaning, landscaping, education, insurance, treatment, and transportation services

Ethics

rules of behavior based on ideas about what is morally good and bad

securities

stocks and bonds

American Institute of Certified Public Accountants (AICPA)

the association that develops and scores the Uniform CPA examination; association also sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments

Controller

the chief accounting officer and heads the accounting department

Enron scandal

the largest bankruptcy reorganization in American history at the time (2001), and also cited as the biggest audit failure stemming from an American energy company "cooking the books"

Business Ethics

the study and examination of moral and social responsibility in relation to business practices and decision-making in business

accounting

the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results

Fraud

wrongful or criminal deception intended to result in financial or personal gain


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