Basic Accounting Test 1

Internal Revenue Service

A government organization that handles millions of income tax returns filed by individuals and businesses and preforms audit functions to verify the data contained in those returns.

Security and Exchange Commission

A governmental organization that has the legal power to establish accounting principles and financial reporting requirements for publicly held companies in the United States.

Sarbanes Oxley Act

A landmark piece of securities law, designed to improve the effectiveness of corporate financial reporting through enhanced accountability of auditors, boards of directors, and management.

Financial statement

A monetary declaration of what is believed to be true about an enterprise.

Certified Public Accountant (CPA)

An accountant licensed by the state after meeting certain requirements.

Income Statement

An activity statement that shows details and results of the company's profit-related activities for a period of time.

Statement of Cash Flows

An activity statement that shows the details of the company's activities involving cash during a period of time.

Periodicity

An entity's life can be subdivided into time periods for purposes of reporting its economic activity.

Private company

Corporation, partnership, sole proprietorship, legally required to file certain state documents. Not required to publically disclose financial information.

Internal Users

People who use accounting information from within an organization.

Tax accounting

Preparation of income tax returns and anticipating the tax effects of business transactions and structuring them I such a way as to minimize the income tax burden.

Generally Accepted Accounting Principles

Principles that provide the framework for determining what information is to be included in financial statements and how the information is to be presented.

Financial accounting

Providing information about the financial resources, obligations, and activities of an economic entity used by external decision makers.

Management Accounting

Providing information that is intended primarily for use by internal management in decision making required to run the business.

Public company

Public business is a stock that can be listed on the NYSE, NASDAQ, ETC. The stock can be purchased by strangers, advantages for raising large amounts of capital. They are legally required to file reports with federal agencies, and ca go private by buying back their stock.

Quick access toolbar

Set of commands that are specified by the user.

Balance Sheet

Shows the financial position as of a particular date. (quarter of year) Reports assets, Liabilities, and owners' equity

Profitability

The ability to generate income

Solvency

The ability to pay its debts as they become due.

Business entity

The business is assumed to have an existence separate from its owners, creditors, employees, and other parties.

Going concern

The company's ability to make enough money to avoid bankruptcy.

Return on investment

The payment of an amount for using another's money.

Accounting system

The personnel, procedures, devises, and records used by an organization to develop accounting information and communicate it to the decision makers.

External users

individuals and other enterprises that have a financial interest in the enterprises, but isn't involved in the day-to-day operations.

Cost

purchase price of asset

Return of investment

the repayment to an investor of the amount originally invested in another enterprise.