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from Hospitality Industry Financial Accounting, Third Edition

accounting

The process of identifying, measuring, and communicating economic information to permit users to make informed judgments and decisions

accounting systems

The branch of accounting that covers the review of a firm's entire information system, not just the accounting system

accrual basis accounting

System of reporting revenues and expenses in the period in which they are considered to have been earned or incurred, regardless of the actual time of collection or payment

adjusting entries

Entries required at the end of an accounting period to record internal adjustments of various accounts due to the matching principle of accounting

assets

Resources available for use by the business - that is, anything owned by the business that has monetary value

auditing

The branch of accounting that examines a firm's financial statements and internal controls for the purpose of expressing opinions regarding the financial statements

balance sheet

Statement of the financial position of the hospitality establishment on a given date, giving the account balances for assets, liabilities, and ownership equity

bookkeeping

The recording and classification of transactions

business entity principle

An accounting principle that requires a business maintain its own set of records and accounts that are separate from other financial interests of its owners

cash basis accounting

System of reporting revenues and expenses at the time they are collected or paid, respectively

conservatism principle

An accounting principle that requires accounting procedures that recognize expenses as soon as possible, but delay the recognition of revenues until they are ensured

consistency principle

An accounting principle that requires that once an accounting method has been adopted, it should be followed from period to period in the future unless a change in accounting methods is warranted and disclosed

continuity of the business unit principle (going concern principle)

The assumption in preparing the accounting records and reports that the business will continue indefinitely and that liquidation is not a prospect

corporation

A form of business organization that provides a separate legal entity apart from its owner or owners

cost accounting

The branch of accounting dealing with the recording, classification, allocation, and reporting of current and prospective costs in order to aid operations personnel in controlling operations

cost principle

An accounting principle that requires recording the value of transactions for accounting purposes at the actual transaction price

double taxation

This occurs when both corporate profits and dividends paid to stockholders are taxed

expenses

Costs incurred in providing the goods and services offered

financial accounting

A branch of accounting dealing with recording, classifying, and summarizing transactions involving revenues, expenses, assets, and liabilities

financial audit

An independent, external audit

full disclosure principle

An accounting principle that requires that a business's financial statements provide information on all the significant facts that have a bearing on their interpretation

fundamental accounting equation

The equation upon which all double-entry bookkeeping is based: Assets equal liabilities plus owners' equity

general partner

The member(s) of a limited partnership who has (have) unlimited liability for the debts of the partnership

income statement

A report on the profitability of operations, including revenues earned and expenses incurred in generating the revenues for the period of time covered by the statement

liabilities

Claims to a business's assets by parties external to the business

limited liability company

An unincorporated business entity that is not restricted to one class of stock and may have any number of owners. It combines the corporate feature of limited liability with the favorable tax treatment of partnerships and sole proprietorships.

limited partner

The member(s) of a limited partnership who has (have) limited liability. They may not actively participate in managing the business.

limited partnership

A partnership in which one or more of the partners have limited liability; there must be at least one general partner

limited liability

Generally when liability is limited to the amount invested in a business; protects personal assets from the firm's creditors

managerial accounting

The branch of accounting that provides information to various management levels for the enhancement of controls, usually in the form of budgets

materiality principle

An accounting principle that states that only items that are "material" or that "make a difference" should be presented in financial statements

objective evidence principle

An accounting principle that states that all accounting transactions and the resulting accounting records should be based on objectively determined evidence to the greatest extent possible

owners' equity

Financial interest of the owners of a business in that business - equal to assets minus liabilities

partnership

An unincorporated business owned by two or more individuals. Owners co-own all the assets and liabilities of the business and share in some manner in its profits or losses.

revenues

Inflows of assets resulting from sales of goods or services to customers

S corporation

A type of corporation in which profits are taxed in the same manner as those of a partnership, avoiding double taxation

sole proprietorship

An unincorporated business entity that is owned by a single individual.

statement of cash flows

A statement that reflects the cash inflows and outflows of a business for a period of time

tax accounting

The branch of accounting dealing with the preparation and filing of tax forms with the various governmental agencies

unit of measurement principle

The accounting principle that requires financial data to be recorded with a common unit of measure (e.g. the U.S. dollar)

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