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54 terms

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.