Accounting Test - Chapter 1

Market Capitalization

(or Market Cap for short) is the value of a company, calculated by multiplying the number of outstanding shares by the current stock price.

Generally Accepted Accounting Principles (GAAP)

A commonly-followed set of accounting rules, standards, and procedures for reporting financial information to external users. GAAP (pronounced "Gap") attempts to improve the clarity, reliability, and comparability of financial information

Sarbanes-Oxley Act (SOX)

A law created in 2002 that helped restore confidence in the financial markets by cracking down on accountin] errors and protecting investors from fraudulent accounting and financial reporting practices

Public Accounting

Also referred to as external accounting, refers to a business that works with their clients to help prepare reports and review (audit) financial information for accuracy and completeness before it is shared publicly.

Private Accounting

Also referred to as internal accounting, this refers to a role inside a company that helps record transactions and prepare /analyze financial statements and reports, in order to inform company decision-making.

Accrual Accounting method

An accounting method that states revenues and expenses are recognized and recorded at the time they are earned or incurred, even if money doesn't change hands.

Cash Accounting Method

An accounting method that states revenues and expenses are recognized and recorded when cash actually changes hands.

Financial Accounting Standards Board (FASB)

An independent, non-profit organization that establishes financial reporting standards through GAAP

Finance

Focuses on the management of the assets, liabilities, and cash flow of an organization, financial analysis like ROl and ROE, a rid financial planning of future growth

External User

Someone outside of a company that has limited access to accounting information.

Internal User

Someone within a company that uses financial information to inform company decision making.

Managerial Accounting

The function of accounting that helps an organization make well-informed decisions through the measurement, analysis, and communication of accounting information.

Financial Accounting

The function of accounting that involves preparing financial statements and reports for external users

Securities and Exchange Commission (SEC)

The government regulatory agency responsible for policing the US financial markets.

Accounting

The process of recording, maintaining, and reporting an organization's financial transactions and records.

Fund Accounting

The system of accounting used by governments and non-profit organizations to group resources into specific funds so they know what resources are available to complete a specific purpose or task.