Accounting & auditingLesson 3 of 8 in the course Using Financial Information and Accounting

Accounting Fundamentals, the Accounting Cycle, and Data Analytics

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

Bookkeeping is the routine process of recording a firm’s financial transactions. Accounting is broader: accountants classify and summarize recorded information, prepare and analyze reports, help manage financial systems, and contribute to financial planning.

Financial statements summarize a company’s transactions over a specified period. The three major statements are the balance sheet, income statement, and statement of cash flows. Reliable bookkeeping provides the records from which accountants prepare these reports.

All flashcards

Bookkeeping
The routine process of recording a firm's financial transactions.
Accounting equation
Assets = Liabilities + Owners’ equity.
Double-entry bookkeeping
Recording transaction effects in multiple accounts to keep the accounting equation balanced.
Accounting cycle
The process that moves from documenting transactions to preparing and analyzing reports.
Data analytics in accounting
Examining data with specialized systems and software to draw conclusions.

Quiz questions

  1. How does accounting differ from bookkeeping?Answer: Bookkeeping records transactions; accounting also classifies and summarizes information, prepares and analyzes reports, and supports planning.
  2. Which equation represents the relationship among a firm's assets, liabilities, and owners’ equity?Answer: Assets = Liabilities + Owners’ equity.
  3. A business borrows $6,000 from a bank and receives the money in cash. What happens immediately?Answer: Assets increase by $6,000 and liabilities increase by $6,000.
  4. What is the primary purpose of a journal in the accounting cycle?Answer: To list financial transactions in chronological order.
  5. How can data analytics support accounting audits?Answer: It can help examine full data sets rather than relying only on samples.

Based on Introduction to Business 2e by Lawrence J. Gitman, Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, James C. Hyatt (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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