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Accounting Ch1
Accounting chapter 1 terms
| Question | Answer |
|---|---|
| Accounting | System that identifies success and failures. |
| Bookkeeping | Recording Transactions and events manually or electronically. |
| Financial Accounting(Public accounting) | Highest level is CPA(Certified public accountant) |
| Managerial accounting | Serves as the decision |
| Ethics | Beliefs that distinguish right from wrong. |
| Generally Accepted Accounting Principles(GAAP) | Rules that govern how accountants measure process, and communicate financial info. |
| Financial Accounting Standards Board (FASB) | A private sector group that sets both broad and specific principles. |
| Entity Concept | Keep track of the business separate than the owners. |
| Reliability Principle(Objectivity) | Account for transactions and events using measurable data. |
| Cost Principle | Actual historical amount cost is measurable. |
| Going Concern Concept | In operation for foreseeable future. |
| Stable/Monetary | unity concept (Stable $) Assume purchasing power is relatively stable. |
| Realization Principle (Revenue Recognition) | Record revenue as u earn it, not when cash comes in. Record expenses as the benefit is used up, not when the cash is paid. |
| Proprietorship | A single owner |
| Partnership | A business owned by 2 or more people. |
| Mutually Agency | 1 partner can in debit all of the debt. |
| Corporation | owned by stockholders |
| Assets | Things that have future value that a company owns or controls. |
| Accounts Recievalbe | The right to recieve money in the future b/c of something thats already been done. |
| Liabilities | The obligation to do something or pay somebody in the future for something already recieved. |
| Accounts payable | Obligation to pay someone in the future. |
| Accounting Equation | Assets= Liabilities+ Equity |
| Unearned Revenue | Obligation to do something. |
| Audit | Examines whether financial statements are prepared using GAAP. It does not attest to absolute accuracy of the statements. |
| Auditiors | Verify effectiveness of internal controls. |
| Balance Sheet | describes a companys financital postion types, and amounts of assets, liablities and equity at a point in time. |
| Business Equity Assumption | A buesiness is accounted for separately from other business entities including its owner. |
| Common Stock (Capital Stock) | When a corporation issues only one class of stock. |
| Conceptual framework and covergence | guide toward standard setting consist of: Objectives,Qualitative Characteristics, Elements,Recognition and measurement |
| Objectives | Provide infor useful to investors, creditors and others |
| Equity | The owner's claim on assets |
| Events | Happenings that affect the accounting equation and are reliable measured. |
| Expanded Accounting Equation | Assets=Liabilities + Owner capital,subt Owner withdrawals, +Revenues subt Expenses |
| Expense recognition principle ( Matching principle) | A company record the expenses it incurred to generate the revenue reported. |
| Expenses | Cost necessary to earn revenues (Ex: cost of staffing, advertising, insurance services, use of supplies and utilites). |
| External transactions | Exchange of value between to entities, which yeild changes in the accounting equation. (Ex: Sale of Ad space by facebook). |
| Internal transactions | Exchanges w/in an entity, which may or may not affect the accounting equation. (Ex: facebook use of suppiles |
| External users | Shareholders(investors), lenders, directors, customers supplies, regulators, lawyers, brokers, and the press. Users of accounting info not directly involved wit the running organization. |
| Full disclosure principle | A company reports the details behind financial statements that would impact user decisions. |
| Income Statement | Describes a company's Revenues, & Expenses along with the resulting Net income or loss over a period of time due to earning activities. |
| Internal users | Those directly involved in managing & operating an organization. |
| International Accounting Standards | An independent group (consisting of individuals from many countries), issues International Financial Reporting Standards. |
| International Financial Reporting Standards | Identify perferred accounting practices. |
| Material Constraints | Only information that would influence the decsions of a reasonable person need to be disclosed. |
| Measurement/Cost principle | Accounting info is based on actual cost. |
| Monetary unit assumption | We can express transactons & events in monetary, or money/units. |
| Net Income | When revenues exceeds expenses. |
| Net loss | Occurs when expenses exceed revenues which decreases equity. |
| Owner Capital | Owner investments. |
| Owner investments | Assets an owner puts into the company & are included under the general account Owner Capital. |
| Owner Withdrawls | Assets an owner takes from the company for personal use. |
| Partnership | A business owned by 2 or more people. |
| Proprietorship | A business owned by one person. |
| Recordkeeping | The recording of transactions & events, either manually or electronical. |
| Return | Monies recieved from an investment; often in percent forms. |
| Return on total assets | Ratio reflecting operating effiency, defined as net income divided by average total assets for the period. |
| Return recognition principle | Prescribing that revenue is recognized when earned. |
| Revenues | Gross increase in equity from a company's business activities that earn income also called sales. |
| Risk | Uncertainity about an expected return. |
| Sarbanes Oxley Act(SOX) | Created public company accounting oversight board, regulates analyst conflicts, imposes corporate goverance requirements, enhances accounting & control disclosures, impacts insider transactions & executive loans, establishes new types of criminal conduct. |
| Securities & exchange | Federal agency congress has charged to set reporting rules for organization that sell ownerships shares to the public. |
| Shareholders | Owners of a corporation. |
| Shares | Equity of a corporation divided into ownership units. |
| Sole Propretorship | Business owned by 1 person. |
| Statement of Cash flows | A financial statement that lists cash in flows recipts & cash outlaws during a period arranged by operating , investing & financing. |
| Statement of Owner's equity | Report of changes in equity over a period. Adjusted for increases (owner investment & net income) & for decreases, withdrawls, and net loss. |
| Time period Assumption | Assumption that an organizations activitie can be divided into specific time periods such as months, quarters or years. |
| Withdrawls | Payment of cash or other assets from a proprietorship or partnership to its owner or owners. |
| Objectives | Provide info useful to investors, creditors and others. |
Created by:
Posiniv01
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