Accounting
A system that organizes financial data into a format for whoever is interested in the information
The people that are interested in the data/information provided by accounting is
Users
Accounting Information System
A system of recording and organizing financial information
Accounts
A measurement used to record business transactions that have a financial impact
Financial Statements
1. Income statement
2. Statement of retained earnings
3. Balance sheet
4. Statement of cash flows
Internal USERS
Owners, Employees, Managers
External USERS
Customers, Investors, Creditors
Regulators
Government, IRS, SEC, State, City, County
Financial Accounting Standards Board (FASB)
Formed in 1973, sets rules for generally accepted accounting principles. Created because of depression and market crash
Generally Accepted Accounting Principles
(GAAP)
A set of accounting standards established by the members of the accounting community. Established by the FASB. Each country has their own GAAP
International Accounting Standards Board
(IASB)
Independent organization made in 2001 to achieve global accounting standards; responsible for creating the IFRS
International Financial Reporting Standards (IFRS)
International accounting standards for use of the international accounting community; Made by the IFRS
Financial Accounting
The process that creates financial reports on an entity for internal and external parties
(This is used for the public to see and to analyze)
Managerial Accounting
The process that measures, identifies, and communicates financial information needed for management to plan and control entity operations
Economic entity assumption
The business is separate entity from its owners
Going Concern assumption
The idea that a company will continue will continue to operate for the future
Monetary unit assumption
Us dollar as the monetary unit of measure, single currency
Periodicity assumption
Accounting records businesses transactions in predefined chunks of time (months, quarters, years)
Historical cost Principle
Idea that company should measure an asset by how much it costs; the asset retains original historical cost value, despite market value
Fair value principle
idea that a company should measure an asset by its fair value; meaning the price the company would receive if it sold the asset (Market based measurement)
Revenue recognition principle
company recognizes revenue when it has satisfied its performance, usually done when delivering a product or service to customer
Expense recognition principle
Company recognizes when expense is incurred in the time period that revenue was recognized (Matching principle)
Full disclosure principle
Company discloses all information that is important that would make an influence of decisions
Materiality is
financial information that influences people to determine whether or not some information is important or not
Industry Practice
Helps accountants follow established standards, common practices, make good decisions