why audited financial statements are important:
bankers, creditors, investors, & gov't agencies rely on an auditor's opinion of the validity of a firm's statement
Audit
an examination of a company's financial statements and accounting practices
generally accepted accounting principles (GAAPs)
accepted set of guidelines and practices for companies reporting financial info and for the accounting profession.
financial accounting standards board (FASB) is developing:
new set of standards combining those of GAAP and the international financial reporting standards
The process of systematically collecting, analyzing, and reporting financial info is called:
accounting
Info that's not divulged to anyone outside the business is referred to as:
proprietary information
Ernst & Young, KPMG, and PricewaterhouseCoopers are all:
public accounting firms
A type of exam that emphasizes not only accounting but decision making is a:
certified accounting exam
Resources that a firm owns are called:
assets
Debts owned by a business are called:
liabilities
Balance Sheet
summary of the dollar amounts of a firm's assets, liabilities, and owner's equity accounts at the end of a specific accounting period.
assets are listed in order of:
liquidity
liquidity
ease with which an asset can be converted into cash
current assets
can be converted into cash or will be used in one year or less
fixed assets
held or used longer than a year
depreciation
process of apportioning the cost of a fixed asset over the period during which it'll be used
Another name for the statement of financial position is the:
balance sheet
Correct order for balance sheet:
assets, liabilities, owner's equity
income statement
summary of a firm's revenues and expenses during a specified accounting period
Cash flow statement
financial statement that provides info about a firm's operating, investing, and financing activities during an accounting period
3 activities according to which a statement of cash flows is organized:
operating, investing, financing