The information system that measures business activities, processes that information into reports and financial statements, and communicates the results to decision makers.
List of an entity's assets, liabilities, and owners' equity as of a specific date. Also called the statement of financial position.
board of directors
Group elected by the stockholders to set policy for a corporation and to appoint its officers.
A business owned by stockholders. A corporation is a legal entity, an "artificial person" in the eyes of the law.
Principle that states that assets and services should be recorded at their actual cost.
An asset that is expectd to be converted to cash, sold, or consume during the next 12 months, or within the business's normal operating cycle if longer than a year.
A debt due to be paid within 1 year or within the entity's operating cycle if the cycle is longer than a year.
An organization or a section of an organization that, for accounting purposes, stands apart from other organizations and individuals as a separate economic unit.
Decrease in retained earnings that results from operations; the cost of doing business; opposite of revenues.
The amount that a business could sell an asset for, or the amount that a business could pay to settle a liability.
Business documents that report financial information about a business entity to decision makers.
Activities that obtain from investor and creditors the cash needed to launch and sustain the business; a section of the statement of cash flows.
generally accepted accounting principles (GAAP)
Accounting guidelines, formulated by the Financial Accounting Standards Board, that govern how accounting is practiced.
A financial statement listing an entity's revenues, expenses, and net income or net loss for a specific period. Also called the statement of operations.
Activities that increase or decrease the long-term assets available to the business; a section of the statement of cash flows.
An economic obligation (a debt) payable to an individual or an organization outside the business.
limited liability company
A business organization in which the business (not the owner) is liable for the company's debts.
The branch of accounting that generates information for the internal decision makers of a business, such as top executives.
Activities that create revenue or expense in the entity's major line of business; a section of the statement of cash flows. Operating activities affect the income statement.
The claim of the owners of a business to the assets of the business. Also called capital, stockholder's equity, or net assets.
The amount of stockholder's equity that stockholders have contributed to the corporation. Also called contributed capital.
property, plant, and equiment
Long-lived assets, such as land, buildings, and equipment, used in the operation of the business. Also called plant assets or fixed assets.
The accounting principle that ensures that accounting records and statements are based on the most reliable data available. Also called the objectivity principle.
The amount of stockholders' equity that the corporation earned through profitable operation and has not given back to stockholders.
The reason for ignoring the effect of inflation in the accounting records, based on the assumption that the dollar's purchasing power is relatively stable.
statement of cash flows
Reports cash receipts and cash payments classified according to the entity's major activites: operating, investing, and financing.
statement of retained earnings
Summary of the changes in the retained earnings of a corporation during a specific period.
Since cost is a reliable measure to use in financial accounting, the cost principle states that assets and services should be recorded at their actual cost.
Able Co. has $500,000 in assets and $400,000 in liabilities; therefore, the equity is $100,000.
Yummy Inc. has beginning retained earnings of $10,000, net income of $50,000, and dividend payments of $5,000; therefore, the ending retained earnings is $55,000.
Ramos, Inc. has monthly revenues of $30,000 and monthly expenses of $18,000, and the company paid $4,000 in dividends; therefore, net income for the month is $12,000.
There are two sections to the statement of cash flows-operating activities and investing activities.
For which form of business ownership(s) are the owners not legally distinct from the business?
Partnership & Proprietorship
The going-concern concept
assumes that the entity will remain in operation for the foreseeable future.
A Jacksonville business paid $45,000 cash for equipment used in the business. At the time of purchase, the equipment had a list of price of $65,000. When the balance sheet was prepared, the value of the equipment had increased to $68,000. What is the relevant measure of the value of the equipment?
Historical cost, $45,000
The relevant measure of value of the assets of a company that is going out of business is the:
Current market value
At the beginning of the period, assets were $450,000 and stockholders' equity was $200,000. During the year, assets increased by $50,000, liabilities decreases by $40,000, and stockholders' equity increased by $90,000. Beginning liabilities must have been:
If liabilities increase $200,000 during a given period and stockholders' equity decreases $65,000 during the same period, assets must:
A retail store buys t-shirts for $125 and sells them for $160. The store's cost of goods sold would be:
For which form of business ownership are the owners of a business legally distinct from the business?
Generally accepted accounting principles, or GAAP, are the rules and procedures established by the Financial Accounting Standards Board, or the FASB.
The stable-monetary-unit concept of accounting:
enables accountants to ignore the effect of inflation in the accounting records.
Which of the following must be added to the beginning retained earnings to compute ending retained earnings?
At the beginning of the period, assets were $490,000 and stockholders' equity was $240,000. During the year, assets increased by $60,000, liabilities increased by $40,000, and stockholders' equity increased by $20,000. Beginning liabilities must have been:
Stockholders' equity for Commerce-GA Corporation on 01/01/2008 and 12/31/2008 were $60,000 and $75,000, respectively. Assets on 01/01/2008 and 12/31/2008 were $115,000 and $105,000, respectively. Liabilities on 01/01/2008 were $55,000. What is the amount of liabilities on 12/31/2008?
Which of the following financial statements shows the net increase or decrease in cash during the period?
statement of cash flows
A retail store sells t-shirts for $85 and purchases them for $60. The store's cost of goods sold would be:
Current assets are assets expected to be converted to cash, sold, or consumed:
within the nex 12 mths
Which of the following statements should be prepared before the balance sheet is prepared?
Income statement and statement of retained earnings
Retained earnings appears on which of the following financial statements?
Statement of retained earnings and balance sheet, but not the income statement or statement of cash flows
A company purchased office supplies for cash. This transaction increased assets and
A company paid cash for an amount owed to a creditor. This transaction decreased cash and:
The owner of a business paid cash from his personal checking account to purchase an automobile for his personal use. This transaction:
is not a transaction recognized by the business
Consider the following transactions:
I. Borrowed cash on a note payable, $80,000
II. Provided services on account, $10,000
III. Received cash from a customer as payment on account, $8,000
IV. Received a utility bill, $1,200
Total assets would be:
The normal balance of the Dividends account is a _______ because it decreases _______.
debit stockholders' equity
The normal balance of the Common Stock account is a ______ because it increases _______.
credit, stockholders' equity
The requirement to report accounting information at regular intervals is known as the:
. An accrual refers to an event where the:
expense or revenue is recorded before the cash settlement
Which term refers to the allocation of the cost of an asset over the asset's useful life?
Which account is credited in the adjusting entry to allocate the cost of equipment?
Arizona Teak Company paid $54,000 for computers. These computers have an estimated service life of 3 years and a salvage value of $3,000. After one year of use, the book value of the computers will be:
. In what order are financial statements generally prepared?
income statement, statement of retained earnings and balance sheet