Accounting Chapter One
About this set
Created by:
lilblackgirl_2 on August 24, 2012
Log in to favorite or report as inappropriate.
Order by
61 terms
Terms | Definitions |
|---|---|
 Accounting | an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activites. |
| Accounting Equation | Equality involving a company's assets, liabilities and equity; Assets = Liabilities + Equity; also called balance sheet equation |
| Assets | Resources a business owns or controls that are expected to provide current and future benefits to the business |
| Audit | Analysis and report of an organization's accounting system, its records and its reports using various tests |
| Auditors | Individuals hired to review financial reports and information systems. Internal auditors of a company are employed to assess and evaluate its system of internal controls, including the resulting reports. External auditors are independent of a company and are hired to assess and evaluate the "fairness" of financial statements (or to perform other contracted financial services) |
| Balance Sheet | Financial statement that lists types and dollar amounts of assets, liabilities, and equity at a specific date |
| Bookkeeping | Part of accounting that involves recording transactions and events, either manually or electronically |
| Business Entity Assumption | Principle that requires a business to be accounted for seperately from its owner(s) and from any other entity |
| Common Stock | Corporation's basic ownership share; also generically called capital stock |
| Conceptual Framework | A written framework to guide the development, preparation, and interpretation of financial accounting information |
| Corporation | A business that is a separate legal entity under state or federal laws with owners called shareholders or stockholders |
| Cost-Benefit Constraint | Notion that only information with benefits of disclosure greater than the costs of disclosure need be disclosed |
| Cost Principle | Accounting principle that prescribes financial statement information to be based on actual costs incurred in business transactions |
| Equity | Owner's claim on the assets of a business; equals the residual interest in an entity's assets after deduction liabilities; also called net assets |
| Ethics | Codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest |
| Events | Happenings that both affect an organization's financial position and can be reliably measured |
| Expanded Acconting Equation | Assets = Liabilities + Equity; Equity equals [Owner capital - Owner withdrawals + Revenues - Expenses] for a noncorporation; Equity equals [Contributed capital + Retained earnings + Revenues - Expenses] for a corporation where dividends are subtracted from retained earnings |
| Expense Recognition Principle | Prescribes expenses to be reported in the same period as the revenues that were earned as a resuly of the expenses |
| Expenses | Outflows or using up of assets as part of operations of a business to generate sales |
| External Transactions | Exchanges of economic value between one entity and another entity |
| External Users | Persons using accounting information who are not directly involved in running the organization |
| Financial Accounting | Area of acconting aimes mainly at serving external users |
| Financial Accounting Standards Board (FASB) | Independent group of full-time members responsible for setting accounting rules |
| Full Disclosure Principle | Principle that prescribes financial statements (including notes) to report all relevant information about an entity's operations and financial condition |
| Generally Accepted Accounting Principles (GAAP) | Rules that specify accounting practices |
| Going-Concern Assumption | Principle that prescribes financial statements to reflect the assumption that the business will continue operating |
| Income Statement | Financial statement that subtracts expenses from revenues to yield a net income or loss over a specified period of time; also includes any gains or losses |
| Internal Transactions | Activities within an organization that can affect the accounting equation |
| Internal Users | Persons using accounting information who are directly involved in managing the organization |
| International Accounting Standards Board (IASB) | Group that identifies preferred accounting practices and encourages global acceptance; issues International Financial Reporting Standards (IFRS) |
| International Financial Reporting Standards (IFRS) | Inernational Financial Reporting Standards (IFRS) are required jor allowed by over 100 countries; IFRS is set by the International Accounting Standards Board (IASB), which aims to develop a single set of global standards, to promote those standards, and to converge national and international standards globally |
| Liabilities | Creditors' claims on organization's assets; involves a probable future payment of assets, products, or services that a company is obligated to make due to past transactions or events |
| Managerial Accounting | Area of acconting aimed mainly at serving the decision-making needs of internal users; also called management accounting |
| Matching Principle | Prescribes expenses to be reported in the same period as the revenues that were earned as a resuly of the expenses |
| Materiality Constraint | Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP |
| Measurement Principle | Acconting information is based on cost with potential sibsequent adjustments to fair value |
| Monetary Unit Assumption | Principle that assumes transactions and events can be expressed in money units |
| Net Income | Amount earned after subtracting all expenses necessary for and matched with sales for a period; also called income, profit, or earnings |
| Net Loss | Excess of expenses over revenues for a perios |
| Owner, Capital | Account showing the owner's claim on company assets; equals owner investments plus net income (or less net losses) minus owner withdrawals since the company's inception; also referred to as equity |
| Owner Investment | Assets put into the business by the owner |
| Owner Withdrawals | Account used to record asset distributions to the owner |
| Partnership | Unincorporated association of two or more persons to pursue a business for profit as co-owners |
| Proprietorship | Business owned by one person that is not organized as a corporation |
| Recordkeeping | Part of accounting that involves recording transactions and events, either manually or electronically |
| Return | Monies recieved from an investment; often in percent form |
| Return on Assets | Ratio reflicting operating effciency; defined as net income divded by average total assets for the period |
| Revenue Recognition Principle | The principle prescribing that revenue is recognized when earned |
| Revenues | Gross increase in equity from acompany's business activities that earn income; also called sales |
| Risk | Uncertaninty about an expected return |
| Sarbanes-Oxley Act | Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws |
| Securities and Exchange Commission (SEC) | Federal agency Congress has charged to set reporting rules for organizations that sell ownership shares to the public |
| Shareholders | Owners of a corporation ; also called stockholders |
| Shares | Equity of a corporation divided into ownership units; also called stock |
| Sole Proprietorship | Business owned by one person that is not organized as a corporation |
| Statement of Cash Flows | A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged by operating, investing and financing |
| Statement of Owner's Equity | Report of changes in equity over a period; adjusted for increases (owner investment and net income) and for decreases (withdrawals and net loss) |
| Stock | Equity of a corporation divided into ownership units |
| Stockholders | Owners of a corporation |
| Time Period Assumption | Assumption that an organization's activities can be divided into specific time periods such as months, quarters or years |
| Withdrawls | Payment of cash or other assets from a proprietorship or partnership to its owner or owners |
First Time Here?
Welcome to Quizlet, a fun, free place to study. Try these flashcards, find others to study, or make your own.