Accounting Chapter 1

Entity

- is recognized as having its own separate identity. An entity may be an individual, a town, a university, or a business.

6) The owner of the sporting goods store where you work has decided to expand the store. She has decided to apply for a loan. What type of information will she give to the bank?

-financial information

1) Why is accounting called the "language of business"?

Because it is the process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties.

What are financial statements?

Periodic reports that contain data about a firms financial affairs that are classified in a meaningful way and summarized.

4) Which organization has the final say on financial accounting issues faced by publicly owned corporations?

Securities and Exchange Commission

3) What are the names of three accounting job positions?

Three job positions are Certified Public Accountant, Managerial accounting, and Governmental accounting.

One requirement for becoming a CPA is to pass the:

Uniform CPA Examination

Corporation

a business entity that is separate from its owners. A corporation has a legal right to own property and do business in its own name.

Exposure draft

after public hearings the Financial Accounting Standards Board releases this to describe the proposed Statement of Financial Accounting Standards. International accounting- is the study of the accounting principles used by different companies.

Social entities

are non-profit organizations such as cities, public schools and public hospitals.

Stockholders

are the corporate owners or shareholders and are not personally responsible for the debts and taxes of the organization. They do not lose more than the cost of the shares of stock.

Auditor's report

contains the auditor's opinion about the fair presentation of the operating results and financial position of the business. It also confirms that the financial information is prepared in conformity with generally accepted accounting principles.

Tax compliance

deals with the preparation of tax returns and the audit of those returns.

Separate entity assumption

describes the concept of keeping the firm's financial records separate from the owner's personal financial records.

Tax planning

involves giving advice to clients on how to structure their financial affairs in order to reduce their tax liability.

Management Advisory Services

involves helping clients improve their information systems or their business performance.

Tax accounting

involves tax compliance and tax planning.

Sole proprietorship

is a business entity owned by one person.

Stock

issued in the form of stock certificates, represents the ownership of the corporation.

Creditor-

the people, companies, or government agencies to whom the business owes money.

Auditing-

the review of financial statements to assess their fairness and adherence to generally accepted accounting principles. CPA accountants perform financial audits.

Economic entity

usually refers to a business or organization whose major purpose is to produce profit for its owners.

Discussion memorandum

written by the Financial Accounting Standards Board to explain the topic being considered in the process of creating generally accepted accounting principles.