AEM 220 Review - AEM220Review Prelim#2...

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AEM 220 Review Prelim #2 Chapter 17 – Financial Information and Accounting *Accounting: the recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions. *Accounting System: the method used to record and summarize accounting data into reports. See page 456 for accounting system graph* Areas of Accounting: 1.) Managerial Accounting: used to provide information and analyses to managers within the organization to assist them in decision making. a. Ex: Measuring and reporting costs of production, marketing, and other functions; preparing budgets (planning); checking whether or not units are staying within their budgets (controlling), and designing strategies to minimize taxes. *Certified Management Accountant (CMA): a professional accountant who has met certain educational and experience requirements, passed a qualifying exam in the field, and been certified by the Institute of Certified Management Accountants. 2.) Financial Accounting : accounting information and analyses prepared for people outside the organization. a. Annual Report: a yearly statement of the financial condition, progress, and expectations of an organization. b. Private Accountant: an accountant who works for a single firm, government agency, or nonprofit organization. c. Public Accountant: an accountant who provides accounting services to individuals or businesses on a fee basis. d. Certified Public Accountant (CPA): an accountant who passes a series of examinations established by the American Institute if Certified Public Accountants. *The Financial Accounting Standards Board (FASB) defines the generally accepted accounting principles. (GAAP). *Sarbanes-Oxley Act: created new government reporting standards for publicly traded companies. 3.) Auditing: the job of reviewing and evaluating the records used to prepare a company’s financial statements.
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a. Certified Internal Auditor (CIA): an accountant who had a bachelor’s degree and 2 years of experience in internal auditing, and who has passed an exam administered by the Institute of Internal Auditors. b. Independent Audit: an evaluation and unbiased opinion about the accuracy of a company’s financial statements. 4.) Tax Accounting: an accountant trained in tax law and responsible for preparing tax returns or developing tax strategies. 5.) Government and Not-for-Profit Accounting: accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget. (Not-for-profit accounting: shows donators where the $ is going.) *The Accounting Cycle: a six step procedure that results in the preperation and analysis of the major financial statements.
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