Accounting

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Accounting

Information and measurement system that identifies, records, and communicates relevant information about a company's business activities.

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.

Auditors

Indiciduals hired to review financial reports and information systems. Internal auditors of a company are employed to assess and evaluate its sysytem 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 quity at a specific date.

Bookkeeping

Part of accounting that involves recording transactions and events, either manually or electronically.

Business entily assumption

Principle that requites a business to be accounted for separeately fom its owner(s) and from any other entity.

Common stock

Corporation's basic ownership share; also genericallly called capital stock.

Corporation

business that is a separeate legal entity under state or federal laws with owners called shareholders or stockholders.

Cost principle

Accounting principle that prescrives financial statement information to be based on acutual costs incurred in bussiness inccurred in cusiness transactions.

Equity

Owner's claim on the assests of a buisness; equals the resideual interest in an entity's assests after deducting 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 bothaggect an organization's financial position and can be reliably measured.

Expanded accounting equation

Assests = Liabilities+ equity; equity equals [Owner capital-Owner withdrawals+ Revenues- expenses] for a non-corporation; equity equals [Contributed capital+Retained earnings+Revenues-expences] for a corporation where dividends are subtracted from retained earnings.

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 enitity and another enitity.

External users

Persons using accounting informaton who are not directly involved in running the organization.

Financial accounting

Area of accounting mainly aimed at serving ecternal users.

Financial Accounting Standards Board (FASB)

Independent group of full-time members responsible for setting accountig rules.

Full diclosure 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 acceptable accounting practices.

Going-convern assumption

Principle that prescribes financail statements to reflect that assumption that the business wil 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 identigies preferred accounting practices and encourages global acceptance; issues International Financial Reporting Standards(IFRS).

Liabilities

Creditors' clams on an 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 accounting mainly aimed 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 result of the expenses.

Monetary unit assumption

Principle that assumes transactions and events can be expressed in money units.

Net loss

Excess of expenses over revenues for a period.

Owner, Capital

Account showing the owner's claim on compnay assets' equals owner investments plus net

Owner investment

Assets put into the business by the owner

Owner withdrawals

Account used to record asset distrubutions to the owner.

Partnership

Unincorporated associatin of two or more persons to pursue a business for profit as co-owner

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 recived from an investment; often in percent form.

Return on assets

Ratio reflecting operating effciency; defined as net income divided by average total assets for the period.

Revenues

Gross increase in equity from a company's business activities that earn income.

Risk

Uncertianty about an expected return.

Sarbanes-Oxley Act

Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corpprate goverance requirements, enhances accounting and control disclosures, impacts insider transations and executive loans, establishes new types of criminal conduct and expands penalties for violations of federal securities.

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.

Shares

Equity of a corporation divided into ownership units.

Sole proprietorship

Business owned by one person that is not organized as a corporation.

Statement of owner's equity

Report of changes in equity over a period; adjusted for increased (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 specfic time periods such as months, quaters, or years.

Withdrawals

Payment of cash or other assests from a proprietorship or partnership to its owner or owners.

Net income

Amount earned after subtracting all expenses necessary for and matched with sales for a period.

Revenue recognition principle

The principle prescribing that revenue is recognized when earned.

Statement of cash flow

A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged by operating, investing, and financing.

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