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Financial Information and Accounting Concepts (Income and Cash Flow…
Financial Information and Accounting Concepts
Accounting
Measuring, interpreting, and communicating financial information to support internal and external decision making
Financial Accounting
The area of accounting concerned with preparing financial information for users outside the organization
Management Accounting
The area of accounting concerned with preparing data for use by managers within the organization
Private Accountants
In-house accountants employed by organizations and businesses other than a public accounting firm
Controller
The highest-ranking accountant in a company, responsible for overseeing all accounting functions
CPA
Professionally licensed accountants who meet certain requirements for education and experience, and who pass a comprehensive examination
Public Accountants
Professionals who provide accounting services to other businesses and individuals for a fee
Audit
Formal evaluation of the fairness and reliability of a client’s financial statements
Rules of Accounting
External auditors
International financial reporting standards (IFRS)
GAAP
Sarbanes-Oxley
Accounting Concepts
Liability
Owner's equity
Assets
Double Entry Bookkeeping
A method of recording financial transactions that requires a debit entry and credit entry for each transaction to ensure that the accounting equation is always kept in balance
Matching Principles
The fundamental principle requiring that expenses incurred in producing revenue be deducted from the revenues they generate during an accounting period
Accrual Basis
An accounting method in which revenue is recorded when a sale is made and an expense is recorded when it is incurred
Cash Basis
An accounting method in which revenue is recorded when payment is received and an expense is recorded when cash is paid
Depreciation
An accounting procedure for systematically spreading the cost of a tangible asset over its estimated useful life
Balance Sheet
Current liabilities
Long term liabilities
Fixed assets
Retained earnings
Current assets
Income and Cash Flow Statements
Cost of goods sold
Gross profit
Net income
Operating expenses
Expenses
EBITDA
Income statement
Statements of cash flows
Profitability Ratios
Return on equity
Return on sales
Earnings per share
Liquidity Ratios
Working capital
Current ratios
Quick ratio
Activity Ratios
Inventory turnover ratio
Accounts receivable turnover ratio
Debt-to-equity ratio
Debt-to-assets ratio