Accounting Chapter 1
The information system that measures business activities, processes that information into reports, and communicates the results to decision.
|Financial Statements|| |
Documents that report on a business in monetary amounts, providing information to help people make informed business decisions.
|Financial Accounting|| |
The branch of accounting that focuses on information for people outside the firm.
|Management Accounting||The branch of accounting that focuses in information for internal decisions makers of a business.|
|Financial Accounting Standards Board (FASB)||The private organization that determines how accounting is practiced in the United States.|
|Certified Public Accountant (CPA)|| |
A licensed accountant who serves the general public rather than one particular company.
|Certified Management Accountant||A licensed accountant who works for a single company.|
|Audit||An examination of a company's financial situation.|
|Proprietorship||A business with a single owner.|
|Partnership||A business with two or more owners.|
A business owned by stockholders; it begins when the state approves its articles of incorporation. A corporation is a legal entity, an "artificial person," in the eyes of the law.
|Stockholder||A person who owns stock in a corporation. Also called a shareholder.|
|Generally Accepeted Accounting Principles (GAAP)||Accounting guidelines, formulated by the Financial Accounting Standards Board, that govern how accountants measure, process, and communicate financial information.|
|Entity||An organiztion or a section of an organization that, for accounting purposes, stands apart from other organizations and individuals as a seperate economic unit.|
|Accounting Equation|| |
The basic tool of accounting, measuring the resources of the business and the claims to those resources: Assets = Liabilities + Owner's Equity.
An Economic resource that is expected to be of benefit in the future.
An economic obligation (a debt) payable to an individual or an organization outside the business.
|Owner's Equity|| |
The claim of a business owner to the assets of the business. Also called capital.
|Account Receivable||A promise to recieve cash from customers to whom the business has sold goods of for whom the business has performed services.|
|Note Receivable||A written promise for future collection of cash.|
|Account Payable||A liability backed by general reputation and credit standing of the debtor.|
|Note Payable||A written promise of future payment.|
|Revenue||Amounts earned by delivering goods of services to customers. Revenues increase owner's equity.|
|Owner Withdrawls||Amounts removed from the business by an owner.|
|Expense||Decrease in owner's equity that occurs from using asets or increasing liabilities in the course of delivering goods or services to customers.|
|Transaction||An event that affects the financial position of a particular entity and can be recorded reliably.|
|Balance Sheet||An entity's assets, liabilities, and owner's equity as of a specific date. Also called the statement of financial position.|
|Net Income||Excess of total revenues over total expenses. Also called net earnings or net profit.|
|Net Loss||Excess of total expenses over total revenues.|
|Income Statement||Summary of an entity's revenues, expenses, and net income or net loss for a specific period. Also called the statement of earnings or the statement of operations.|
|Statement of Owner's Equity||Summary of the changes in an entity's owner's equity during a specific period.|
|Statement of Cash Flows||Reports cash receipts and cash payments during a period.|
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