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Review Questions 77

Financial accounting consists of fi ve key processes: general ledger
accounting, accounts receivable accounting, accounts payable accounting,
asset accounting, and bank ledger accounting. These processes are closely
linked with other operational or logistics processes throughout the fi rm, and
they share a great deal of the common master data found in those processes.
Financial accounting uses several unique types of data, such as the chart
of accounts, general ledger accounts, subsidiary ledgers, and reconciliation
accounts, to provide a complete picture of the fi rm’s fi nancial status.
Management accounting focuses primarily on the allocation of costs and
revenues to proper areas within the fi rm. Costs and revenues that are incurred
as the various business processes are executed are accumulated in various cost
objects. Firms then utilize these data to manage the organization.

KEY TERMS

Account determination Equity

Account group Expenses
Accounts payable accounting Financial accounting
document
Accounts receivables accounting
Financial statement version
Asset accounting
General ledger (GL)
Asset class
Income statement
Asset explorer
Liabilities
Assets
Parallel accounting
Balance sheet
Profi t and loss statement
Bank ledger accounting
Reconciliation accounts
Business areas
Revenues
Chart of accounts (COA)
Segment
Cost center
Statement of cash fl ow
Cost objects
Subledgers
Depreciation
Subsidiary ledgers
Depreciation areas

REVIEW QUESTIONS

1. Explain the difference between fi nancial accounting and management
accounting.
2. Briefl y describe the key processes in fi nancial accounting.

3. Explain the key organizational data in fi nancial accounting and the rela-
tionships between them.

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