Accounting Review for Test 1.docx

Accounting Review for Test 1.docx - *stuff on test...

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* stuff on test Accounting test chapters 1-3 Accounting- is an information and measurement system that identifies, records, and communicates information about an organizations’ business activities. Recordkeeping/ Bookeeping- Part of accounting that involves recording transactions and events, either manually or electronically Accounting Functions: Identifying (select transactions and events), Recording (input, measure, and log), and Communicating (prepare, analyze, and interpret). 2 types of Accounting users: External Users: Persons using accounting information who are not directly involved in running the organization. (Lenders, shareholders, governments, consumer groups, external auditors, and customers.) Internal users: executives, managers, internal auditors, sales staff, budget analysts, and controllers Financial accounting- area of accounting aimed mainly at serving external users Lenders (creditors) loan money or other resources to an organization. Banks, savings and loans, co-ops, and mortgage and finance companies are lenders. Lenders use information to assess whether an organization will repay its loans with interest. Shareholders ( investors ) are the owners of a corporation. They use accounting reports in deciding whether to buy, hold, or sell stock. Directors are elected to a board of directors that oversees an organization. Directors report to shareholders and they hire top executive management. External (independent) auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles. Nonexecutive employees and labor unions use financial statements to judge the fairness of wages, assess job prospects, and bargain for better wages. Regulators have legal authority over certain activities of organizations. For example, the Internal Revenue Service (IRS) requires accounting reports in computing taxes. Voters, legislators, and government officials use accounting information to monitor and evaluate government receipts and expenses. Contributors to nonprofit organizations use accounting information to evaluate the use and impact of their donations. Suppliers use accounting information to judge the financial health of a customer before making sales on credit. - Customers use financial reports to assess the staying power of potential suppliers. Internal Users- persons using accounting information who are directly involved in managing the organization. 1
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* stuff on test Accounting test chapters 1-3 Managerial accounting- area of accounting aimed mainly at serving the decision-making needs of internal users. Research and development managers need information about projected costs and revenues of innovations. Purchasing managers need to know what, when, and how much to purchase.
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