Accounting

Revenue from the sale of merchandise is recorded as

sale

Merchandising businesses

sell products they purchase from other businesses to customers. Wal-Mart Stores, Inc. (general merchandise) Amazon.com (general merchandise)

Public accountants who have met a state's education, experience, and examination requirements may become

Certified Public Accountants (CPAs)

Accounting External Users

Investors, Creditors, Customers, Government

profit

Profit is the difference between the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services.

established standards for corporate responsibility and disclosure.

The Sarbanes-Oxley Act

fiscal year

The annual accounting period adopted by a company

financial accounting

The area of accounting that provides external users with information

managerial accounting or management accounting.

The area of accounting that provides internal users with information

stockholders' equity

The owners' equity in a corporation.

revenue

a business earns money by selling goods or services to its customers.

Ethics

are moral principles that guide the conduct of individuals.

Manufacturing businesses

convert basic inputs into products that are sold to customers. Ford Motor Co. (cars, trucks, vans) Dell Inc. (personal computers)

Accounting

defined as an information system that provides reports to users about the economic activities and condition of a business

business

is an organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers

Corporation

is organized under state or federal statutes as a separate legal taxable entity. Generates 90% of business revenues. 20% of the business organizations in the United States. Ownership is divided into shares called stock. Can obtain large amounts of resources by issuing stock. Used by large businesses.

Proprietorship

is owned by one individual. 70% of business entities in the United States. Easy and inexpensive to organize. Resources are limited to those of the owner. Used by small businesses.

Accounting Internal Users

managers , employees

When expenses exceed revenues

net income, net profit, or earnings.

Items such as supplies that will be used in the business in the future are called ____ which are also assets

prepaid expenses

Service businesses

provide services rather than products to customers. Delta Air Lines (transportation services) The Walt Disney Company (entertainment services)

revenue include rent

rent revenue

time period concept

requires a company to report its economic activities on a regular basis for a specific period

requires that economic data be recorded in dollars

the unit of measurement

A concept of accounting that requires a company to report its economic activities on a regular basis for a specific period of time.

time period concept

5 Processes which accounting provides

1. Identify Users 2. Assess Users Information Need 3. Design Accounting System 4. Record Economic Data 5.Prepare Accounting Reports

Balance sheet

A list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or a year.

Public Company Accounting Oversight Board (PCAOB)

A new oversight body for the accounting profession that was established by the Sarbanes-Oxley Act.

Statement of cash flows

A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.

Statement of owner's equity

A summary of the changes in the owner's equity that have occurred during a specific period of time, such as a month or a year.

Income statement

A summary of the revenue and expenses for a specific period of time, such as a month or a year.

public accounting

Accountants who provide services on a fee basis

natural business year.

Corporations often use a fiscal year that ends when business activities have reached the lowest point in their annual operating cycle, which allows more time to prepare financial reports.

Assets

Everything Own. Resource owned by a business include cash, land, buildings, and equipment.

Liability

Everything you owe. The rights of creditors are the debts of the business

has the primary responsibility for developing accounting principles.

Financial Accounting Standards Board (FASB)

private accounting

Managerial accountants employed by a business

an agency of the U.S. government, has authority over the accounting and financial disclosures for companies whose shares of ownership (stock) are traded and sold to the public

Securities and Exchange Commission (SEC),

stockholders' equity

Since stockholders own a corporation, the rights of owners of a corporation

The liability created by a purchase on account is called

account payable

Limited Liability Company LLC

combines the attributes of a partnership and a corporation. 10% of business organizations in the United States (combined with partnerships). Often used as an alternative to a partnership. Has tax and legal liability advantages for owners. Mosel & Farmer, CPAs, LLC

Assets used in this process of earning revenue are called

expenses

revenue from providing services is recorded as

fees earned

generally accepted accounting principles (GAAP)

financial reporting information allow investors and other users to compare one company to another.

After transactions have been recorded and summarized, reports are prepared for users. The accounting reports providing this information are called

financial statements

Partnership

is owned by two or more individuals. 10% of business organizations in the United States (combined with limited liability companies). Combines the skills and resources of more than one person.

When revenues exceed expenses, it is referred to a

it is referred to as net loss.

Owners Equity

what you are worth. The rights of the owners of a proprietorship, partnership, or limited liability company