study business test 2

study business test 2 - Accounting Accounting- the...

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Accounting Accounting- the recording measurement and interpretation of financial information used in business decisions Sarbanes Oxley act-2002 - Public company accounting oversight board - Works with security and exchange commission - Works with financial accounting standards board - Security Federal sentencing guidelines for organizations - Increased organizational accountability for misconduct - Management has responsibility for control and prevention of misconduct - “ top management must cultivate high ethical standards that will serve Types of accountants - Public accountant o An independent professional who provides accounting services to the public for a fee CPA (certified public accountant) - Private accountant o An accountant employed by a corporation gov agency or other organization CPA or CMA (certified management accountant) Financial accounting - Used by the company to report financial performance to any group outside the business Managerial accounting - Used internally by the company in the planning and directing the course of the organization - Ex- cash flow, budgets, operations, costing Accounting vs. Bookkeeping
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- Bookkeepers are responsible for obtaining and recording the information that accountant require to analyze a forms position - Accountants are not only GAAP equity - Generally accepted accounting principles - Are guidelines and procedures governing this form and content of financial reports and formulated by the financial accounting standards board - Conservatism o Prudent reporting - Realization - Matching - Consistency - Materiality - Full disclosure and transparency The accounting equation - The relationship between assets, liabilities, and owner o Assets- things of value that a firm owns o Liabilities- a firms debts and obligations o Owners equity- the difference between a firms assets and its liabilities Assets-liabilities+ owners equity Own=owe +worth Assets – liabilities-owners equity Double entry bookkeeping - A system of recording and classifying business transactions in separate accounts in order to maintain the balance of the accounting equation Key income statement terms - Revenue
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o Cost of goods sold o Gross income - Expenses o o o - Net income The Balance sheet - A financial report that shows a snapshot of an organization’s financial position at a given point in time Analyzing financial statements with ratio analysis - Ratios compare one thing to another relationships correlations - Uses info from financial statements - Puts complex info into sharper focus - Allows us to measure performance over time and compare with similar entities Types of ratios - Profitability ratio
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study business test 2 - Accounting Accounting- the...

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