ACCOUNTING EXAMINES

ACCOUNTING EXAMINES Accounting - ANS-the process of measuring, interpreting, and communicating financial information to enable people inside and outside the firm to make informed decisions Who are the major users of accounting information? - ANS-Owners, stockholders, potential investors, creditors Management Employees, union officials Lenders, suppliers Government agencies, economic planners, and consumer groups Three major business activities in which accountants play a major role - ANS-Financing activities provide necessary funds to start/expand a business Investing activities provide valuable assets required to run a business Operating activities focus on selling goods/services, but also consider expenses as important elements of sound financial management What is GAAP? - ANS-Generally accepted accounting principles rules for accounting in the US FASB - ANS-Financial accounting standards board makes the rules for GAAP SEC - ANS-US Securities and exchange commission chief federal regulator of financial markets and accounting industry has authority to establish financial accounting and reporting standards for publicly held companies SOX - ANS-Sarbanes-Oxley act increased the reporting requirement for publicly traded companies created because of decline in public trust why CEO's responsible to know exactly what their people are doing because of SOX Double-entry bookkeeping - ANS-each transaction must have an offsetting transaction 4 Major Financial Statements - ANS-Balance sheet Income statement Statement of owners' equity Statement of cash flows Difference between a current and a long-term asset - ANS-Current: cash/other assets that are expected to be converted to cash within a year Long-term: assets that are useful for more than 1 year Balance sheet - ANS-What a company owns What a company owes Owners'/shareholder's equity leftover Only accurate for one day (snapshot in time) Why is a a balance sheet useful? - ANS-Can they pay their bills? How much money has been invested in them? What do they have? Two ways to get stuff - ANS-Debt financing Equity financing