ADMS 2500 – FINAL EXAM NOTES
System for measuring the results of business activities and communicating those results to interested
Language of business
The process of recording, classifying, reporting, and interpreting the financial data of an organization.
Private Sector Accounting:
Consists of both Profit &Not For Profit
Employers include: manufacturers, wholesalers, and retailers; Jobs include: data keeping, reporting, and
designing EDP systems
Assist management in planning and controlling the firms operations
Controller is the head of the accounting department; interacts with executive management
Internal Auditor investigates policies and procedures designed to safeguard assets, promote operational
efficiency, and provide reliable information
Public Sector Accounting:
Consists of Government, Profit &Not For Profit
Includes both Financial and Managerial Accounting
Accountants in public accounting firms are granted licenses to practice by their professional association
Example: Auditing of Governmental Agencies & Private Firms conducting business with Government
Preparation of reports for use by persons outside a firm.
Example: Potential Investor, Banks (Extending Credit)
Financial Statement is the most commonly used report, as it conforms to GAAP
Financial accounting reports tend to be more standardized in terms of format and content than those
used in managerial accounting.
Preparation of reports for use by managers within a firm.
Users of information within a firm can specify the types of information they need for their decisions;
managerial accounting reports are designed to satisfy these needs.
Example: Corporate Treasurer, Production Manager, Sales Manager
Deciding whether to borrow short term, how to route special order, determining what prices to charge Financial Reporting Process
External Environment -> Accounting System -> Published Financial Statements, Internal Management
Reports, Special Reports for Regulators & Other Bodies
Information need Report name Report Description
How well is the enterprise doing? Is it profitable? Income Statement Presents the results of operating activities
for a period of time
Lists the enterprise's assets (economic
Will the enterprise do as well in the future? Does it have resources), its liabilities (obligations) and
the resources it needs? What promises were made to Balance Sheet
obtain these resources, i.e., what are its obligations? the owners' residual interest at a point in
Are owners withdrawing resources or investing more Shows the increases in equity from
Statement of Equity operating profits and new investment and
distribution of assets to owners
Reports the change in cash and the cash
Does the enterprise generate enough cash to be self-
sustaining? If not, where does it get cash to survive? If it Cash Flow Statement inflows and outflows from operating,
financing and investing activities for a
generates excess cash, how does it use it? period of time.
Lists a Firm’s Assets (Resources), Liabilities (Obligations), and Owner’s Equity (owners' invested capital
plus undistributed earnings) on a given date.
Balance Sheet Equation: Liabilities + Equity = Assets
Double Entry Bookkeeping: Every change in an asset, liability or owner's equity item, at least one othe