Accounting I Chapter 1

taxation

see tax accounting

Certified Public Accountant (CPA)

A public accountant who has met certain educational and experience requirements and has passed an examination prepared by the American Institute of Certified Public Accountants.

Forensic accounting

A specialized field that combines fraud detection, fraud prevention, litigation support, expert witnessing, business valuations, and other investigative activities.

Accounting Standards Update

A standard issued by the Financial Accounting, Standards Board. These standards must be followed when preparing financial statements. The updates are included in the FASB Accounting Standards Codification.

Accounting

A system of gathering, financial information about a business and reporting this information to users.

partnership

A type of ownership structure in which more than one person owns the business.

sole proprietorship

A type of ownership structure in which one person owns the business.

corporation

A type of ownership structure in which stockholders own the business. The owners' risk is usually limited to their initial investment, and they usually have very little influence on the business decisions.

summarizing

Bringing the various items of information together to determine a result.

Identify career opportunities in accounting

Career opportunities in accounting include work in public accounting, private accounting, and governmental and non-for-profit accounting.

interpreting

Deciding the meaning and importance of the information in various reports.

Accountant

Designs the accounting information system and focuses on analyzing and interpreting information.

cost accounting

Determining the cost of producing specific products or providing services and analyzing for cost effectiveness.

Classify different types of businesses by activities

Different types of businesses classified by activities are a service business, a merchandising business, and a manufacturing business.

recording

Entering financial information about events affecting the company into the accounting system.

public hearing

Following the issuance of a discussion memorandum, public meetings are often held by FASB to gather opinions on the accounting issue.

Define GAAP and describe the process used by FASB to develop these principles.

Generally accepted accounting (GAAP) are the rules that businesses must follow when preparing financial statements. FASB takes the following steps to develop an accounting standard: 1. The issue is placed on the Board's agenda 2. After researching the issue, a discussion memorandum is issued. 3. Public hearing are held. 4. An exposure draft is issued. 5.The statement of financial accounting standards is issued.

Bookkeeper

Generally supervises the work of accounting clerks, helps with daily accounting work, and summarizes accounting information.

Financial accounting

Includes preparing various reports and financial statements and analyzing operating, investing, and financing decisions.

internal auditing

Reviewing the operating and accounting control procedures adopted by management to make sure the controls are adequate and being followed; assuring that accurate and timely information is provided.

tax accounting

Services focused on tax planning, preparing tax returns, and dealing with the Internal Revenue Service and other governmental agencies.

classifying

Sorting and grouping similar items together rather than merely keeping a simple, diary-like record of numerous events.

reporting

Telling the results of the financial information.

Financial Accounting Standards Board Accounting Standards Codification

This Codification is an electronic database that provides one authoritative source for the standards which must be followed by U.S. companies.

Exposure Draft

This document explains the rules the FASB believes firms should follow in accounting for a particular event. Based on the responses to the exposure draft, the Board will decide if any changes are necessary before issuing a final standard.

Define three types of business ownership structures

Three types of business ownership structures are the sole proprietorship, the partnership, and the corporation.

merchandising business

A business that buys products to sell.

manufacturing business

A business that makes a product to sell.

service business

A business that provides a service.

Certified Fraud Examiner (CFE)

A forensic accountant who has passed the exam offered by the Association of Certified Fraud Examiners.

para-accountant

A paraprofessional who provides many accounting, auditing, or tax services under the direct supervision of an accountant.

Accounting information systems

Accountants in this area design and implement manual and computerized accounting systems.

Certified Management Accountant (CMA)

An accountant who has passed an examination offered by the Institute of Management Accountants.

Sarbanes-Oxley Act (SOX)

An act passed by Congress to help improve reporting practices of public companies.

Certified Internal Auditor ( CIA)

An internal auditor who has achieved professional recognition by passing the uniform examination offered by the Institute of Internal Auditors.

Analyzing

Looking at events that have taken place and thinking about how they affect the business.

generally accepted accounting principles (GAAP)

Procedures and guidelines developed by the Financial Accounting Standards Board to be followed in the accounting and reporting process.

management advisory services

Providing advice to businesses on a wide variety of managerial issues.

Accounting clerk

Records, sorts, and files accounting information.

auditing

Reviewing and testing to be certain that proper accounting policies and practices have been followed.

Controller

The accountant who oversees the entire accounting process and is the principal accounting officer of a company.

Preliminary View

The first document issued by FASB when developing an accounting standard. This document identifies the pros and cons of various accounting treatments for an event and invites others to comment.

budgeting

The process in which accountants help managers develop a financial plan.

The Purpose of Accounting

The purpose of accounting is to provide financial information about the current operations and financial condition of a business to individuals, agencies, and organizations.

Describe the accounting process

The six major steps of the accounting process are analyzing, recording, classifying, summarizing, reporting, and interpreting.