Chapter 5: Accounting Reports & the Outside World

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Audit

The check of business accounting records in order to give an opinion on whether the financial statements present the business fairly.

Auditors

Certified public accountants who audit accounting records.

Certified Public Accountants

(CPA) Accountants licensed by the state as professional independent verifiers of business financial statements.

Financial Accounting Standards Board

(FASB) The organization of accountants that has the responsibility of creating accounting rules.

Generally Accepted Accounting Principles

(GAAP) The rules of accounting that everyone must follow.

Managerial Accounting

The skill of providing financial information to run a large business.

Conservative Principle

The accounting principle that requires accountants to resolve financial statement uncertainty in the least favorable way.

Going-Concern Principle

The accounting principle that requires that financial statements be based on the assumption that the business will last indefinitely.

Historical Cost Principle

The accounting principle that requires assets to be reported on balance sheets at their historical cost.

Objectivity Principle

The accounting principle that requires business transactions to be recorded using the best objective evidence.

Stable Monetary Unit Principle

The accounting principle that assumes that the value of money stays the same year after year.

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