Accounting: a comprehensive system for collecting, analyzing, and communicating
Bookkeeping: recording accounting transactions.
Accounting information system (AIS): an organized procedure for identifying,
measuring, recording, and retaining financial information so that it can be used in
accounting statements and management reports.
Controller: the individual who manages all the firm’s accounting activities.
Financial and managerial accounting
Financial accounting: the process whereby interested groups are kept informed
about the financial condition of a firm.
Managerial (management) accounting: internal procedures that alert managers
to problems and aid them in planning and decision making.
Chartered accountants (CA): an individual who has met certain experience and
education requirements and has passed a licensing examination; acts as an
outside accountant for other firms.
Certified general accountants (CGA): an individual who has completed an
education program and passed a national exam; works in private industry or a
Certified management accountants (CMA): an individual who has completed a
university degree, passed a national examination, and completed a strategic
leadership program; works in industry and focuses on internal management
Auditing: an accountant’s examination of a company’s financial records to
determine whether it used proper procedures to prepare its financial reports.
Forensic accountant: an accountant who tracks down hidden funds in business
firms, usually as part of a criminal investigation.
Generally accepted accounting principles (GAAP): standard rules and methods
used by accountants in preparing financial reports.
Management consulting services: specialized accounting services to help
managers resolve a variety of problems in finance, production scheduling, and
Private accountants: an accountant hired as a salaried employee to deal with a
company’s day- to-day accounting needs.
The accounting equation : the most basic toll of accounting, used to balance
the data pertaining to financial transactions: assets=liabilities+ owner’s equity Asset: any economic resource that is expected to benefit a firm or an individual
who owns it.
Liability: a debt that the firm owes to an outside party.
Owners’ equity: the amount of money that owners would receive if they sold all
of a company’s asset and paid all its liabilities.
Double entry accounting system: a bookkeeping system, developed in the fifteen
century and still in use, that requires every transaction to be entered in two
ways-how it affects assets and how it affects liabilities and owners’ equity-so that the
accounting equation is always in balance.
Financial statements: any of several types of broad reports regarding a
company’s financial status; most often used in reference to balance sheets, income
statements, and/or statements of cash flows.
Balance sheet: supply detailed information about the accounting equation
factors: assets, liabilities, owners’ equity
1. Current assets: cash and other assets that can be converted into cash
within a year
Accounts receivable: amounts due from customers who have
purchased goods on credit
Merchandise inventory: the cost of merchandise that has been
acquired for sale to customers and is still on hand
Prepaid expenses: include supplies on hand and rent paid for the
period to come
2. Fixed assets: assets that have long-term use or value to the firm, such as
land, buildings, and machiner