Firm During An Accounting Period example essay topic

Accounting: process Accounting Chapter 17 Accounting: process of systematically collecting, analyzing, and reporting financial information. Private accountant: employed by a organization Private Accountants provide the following services: General accounting: recording business transactions and preparing financial statements Budgeting: Develop budgets for sales and operating expenses. Cost Accounting: Determining the cost of producing specific products or services. Tax Accounting: Planning tax strategy and preparing tax returns for the firm. Public Accountant: an accountant whose services may be hired on a fee basis by individuals or firms. Chartered accountant (CA) or Certified general accountant (CGA), Certified management accountant (CMA): an individual who has met requirements for accounting education and experience and has passed a set of accounting examinations from their respective professional organization.

Assets: the resources that the firm owns Liabilities: firms debts and obligation- what it owes to others Owners Equity: the difference between a firms assets and its liabilities Accounting Equation: the basis for the accounting process: assets = liabilities + owners? equity Revenues: dollar amounts received by a firm Expenses: the costs incurred in operating a business. Double-entry book-keeping: a system in which each financial transaction is recorded as two separate accounting entries to maintain the balance shown in the accounting equation. General journal: a book of original entry in which typical transactions are recorded in order of their occurrence. General Ledger: book of accounts containing a separate sheet or section for each account. Posting: process of transferring journal entries to the general ledger. Trial Balance: a summary of the balances of all general ledger accounts at the end of the accounting period.

Balance Sheet: summary of the dollar amounts for a firm's assets, liabilities, and owners? equity accounts at a particular time. Liquidity: the ease which an asset can be converted into cash. Current assets: cash and other assets can be converted into cash or that will be used in a year or less. Prepaid expenses: assets that have been paid for in advance, but not been used. Fixed assets: assets that will be held or used for a period longer than one year. Depreciation: process of apportioning the cost of a fixed asset over the period during which it will be used.

Intangible assets: do not exist physically but have a value based on legal rights or advantages that they confer on a firm. Goodwill: value of a firm's reputation, location, earning capacity, and other, intangibles that make the business a profitable concern. Current liabilities: debts that will be repaid in one year or less. Accounts Payable: short-term obligations that arise as a result of making credit purchases. Notes Payable: Obligations that have been secured with promissory notes. Long-term liabilities: debts that need not be repaid for at least one year.

Income Statement: a summary of a firm's revenues and expenses during an accounting period. Gross sales: the total dollar amount of all goods and services sold during the accounting period. Net Sales: the actual dollar amount received by a firm for the goods and services it has sold, after adjustments for returns, allowances, and discounts. Cost of Goods sold: sold during the accounting period; equal to beginning inventory plus net purchases less ending inventory. Cost of goods sold = beginning + net – ending Inventory purchases inventory Gross profit on sales: net sales? cost of goods sold Net income: profit earned (or the loss suffered) by a firm during an accounting period, after all expenses have been deducted from revenue. Statement of cash flows: illustrates the effect on cash of the operating, investing, and financing activities of a company for an accounting period.

Financial ratio: a number that shows the relationship between two elements of a firms financial statements Net profit margin = Net income after taxes Net sales Return on equity = net income after taxes Owners? equity Earnings per share = Net income after taxes Common-stock shares Outstanding Working Capital: difference between current assets and current liabilities. Current Ratio = current assets current liabilities acid-test ratio = current assets? inventory current liabilities accounts receivable turnover = net sales A / R Debts-to-assets ratio = total liabilities Total assets Debt-to-equity ratio = total liabilities owners? equity