Intro to Accounting Notes
Chapter 1 Notes: Accounting & the Business Environment
Accounting: The information system that measures business activities, processes the information into reports, and communicates the results to decision makers.
Two Major Fields of Accounting:
1) Financial Accounting: The field of accounting that focuses on providing information for external decision makers.
2) Managerial Accounting: The field of accounting that focuses on providing information for internal decision makers.
Certified Public Accountants (CPAs): Licensed professional accountants who serve the general public.
Certified Management Accountants (CMAs): Certified professionals who specialize in accounting and financial management knowledge that typically work for a single company.
Financial Accounting Standards Board (FASB): private organization that oversees the creation and governance of accounting standards.
Securities and Exchange Commission (SEC): the US government agency that oversees the US financial markets.
Generally Accepted Accounting Principles (GAAP): the main US accounting rule book, created and governed by the FASB.
Cost Principle: states that acquired assets and services should be recorded at their actual cost.
Going Concern Assumption: assumes that the entity will remain in operation for the foreseeable future.
Accounting Equation: Assets=Liabilities + Equity
Assets: an economic resource that is expected to benefit the business in the future.
Liabilities: debts that are owed to creditors.
Equity: the owners claim to the assets of the business.
Retained Earnings: capital earned by profitable operations of a corporation that is not distributed to stockholders.
Net Income: the result of operations that occurs when total revenues are greater than total expenses.
Revenues: amounts earned from delivering goods or services to customers.
Expenses: the cost of selling goods or services.
Steps to Analyze a Transaction
Accounting: The information system that measures business activities, processes the information into reports, and communicates the results to decision makers.
Two Major Fields of Accounting:
1) Financial Accounting: The field of accounting that focuses on providing information for external decision makers.
2) Managerial Accounting: The field of accounting that focuses on providing information for internal decision makers.
Certified Public Accountants (CPAs): Licensed professional accountants who serve the general public.
Certified Management Accountants (CMAs): Certified professionals who specialize in accounting and financial management knowledge that typically work for a single company.
Financial Accounting Standards Board (FASB): private organization that oversees the creation and governance of accounting standards.
Securities and Exchange Commission (SEC): the US government agency that oversees the US financial markets.
Generally Accepted Accounting Principles (GAAP): the main US accounting rule book, created and governed by the FASB.
Cost Principle: states that acquired assets and services should be recorded at their actual cost.
Going Concern Assumption: assumes that the entity will remain in operation for the foreseeable future.
Accounting Equation: Assets=Liabilities + Equity
Assets: an economic resource that is expected to benefit the business in the future.
Liabilities: debts that are owed to creditors.
Equity: the owners claim to the assets of the business.
Retained Earnings: capital earned by profitable operations of a corporation that is not distributed to stockholders.
Net Income: the result of operations that occurs when total revenues are greater than total expenses.
Revenues: amounts earned from delivering goods or services to customers.
Expenses: the cost of selling goods or services.
Steps to Analyze a Transaction