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Accounting
Accounting Ch2
| Term | Definition |
|---|---|
| Accrual-basis acounting | Transactions that change a company's financial statements are recorded in the period in the events occur |
| Classified balance sheet | A balance sheet that contains a number of standard classifications and sections |
| Comparability | Ability to compare the accounting information of different companies because they use the same accounting principles |
| Consistency | Use of the same accounting principles and methods from year to year within a company |
| Cost constraint | Constraint of determining whether the cost that companies will incur to provide the information will out weigh the benefit that financial statement users will gain from having the information available |
| Current Assists | Cash and other resources that companies reasonably to convert to cash or use up within one year or the operating cycle, whichever is longer |
| Current liabilites | Obligations that a company reasonably expect to pay within the next year or operating cycle, whichever is longer |
| Current ratio | A measure used to evaluate a company's liquidity and short-term dept paying ability;computed as current assets divided by current liabilities |
| Debt to total assets ratio | Measures the percentage of total financing provided by creditors; computed as total dept divided by total assets |
| Earnings per share (EPS) | A measure of the net income earned on each share of common stock; computed as net income minus preferred stock dividends divided by the average number of common shares outstanding during the year |
| Economic entity assumption | An assumption that every economic entity can be separately identified and accounted for |
| Fair value principle | Assets and liabilities should be reported at fair value (the price received to sell an asset of sell a liability) |
| Faithful representation | Information that is complete, natural, and free from errors |
| Financial Accounting Standards Board (FASB) | The primary accounting standards standard-setting body in the United States |
| Free cash flow | Cash remaining from operating activities after adjusting for capital expenditures and dividends paid |
| Full disclosure principle | Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users |
| Generally accepted accounting principles (GAAP) | A set of rules and practices, having substantial authoritative support, that the the accounting profession recognizes as a general guide for financial reporting purposes |
| General concern assumption | The assumption that the company will continue in operation for the foreseeable future |
| Intangible asssets | Assets that do not have physical substance |
| International Accounting Standards Board (IASB) | An accounting standard-setting body that issues standards adopted by many countries outside of the United States |
| International Financial Reporting standards (IFRS) | Accounting standards, issued ny the the IASB, that have been adopted by many countries outside of the United States |
| Liquidity | The ability of a company to pay obligations that are expected to become due within the next year or operation cycle |
| Liquidity ratio | Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash |
| Long-term investmants | Generally, (1) investments in stock and bonds of other corporations that companies hold for more then one year, and (2) long-term assets, such as land and buildings, not currently being used in the companies operations |
| Materiality constraint | The constraint of determining whether an item is large enough to likely influence the decision of an investor or creditor |
| Monetary unit assumption | An assumption that requires that only those things that can be expresses in money are included in the accounting records |
| Operating Cycle | The average time required to go from cash to cash in producing revenue |
| Periodicity assumption | An assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business |
| Property, plant, and equipment | Assets with relatively long useful lives that companies use in operating the business |
| Public Company Accounting Oversight Board (PCAOB) | The group charged with determining auditing standards and reviewing them the performance of auditing firms |
| Ratio | An expression of the mathematical relationship between one quantity and another |
| Ratio analysis | A technology for evaluating financial statements that express the relationship among selected items of a financial statement data |
| Revelance | The quality of information that indicates the information makes a difference in decision |
| Securities and Exchange Commision | The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies |
| Solvency | The ability of a company to pay interest as it comes due and to repay the balance of debt at its maturity |
| Solvency ratios | Measures of the ability of the company to survive over a long period of time |
| Statement of stockholders' equity | A financial statement that presents the factors that caused stockholders' equity to change during the period, including those that caused retained earnings to change |
| Timely | Information that is available to decision makers before it loses its capacity to influence decisions |
| Understandability | Information presented in a clear and concise fashion so that users can interpret it and comprehend its meaning |
| Verifiable | Information that is proven to be free from error |
| Working capital | The difference between the amounts of current assets and current liabilities |
Created by:
NickUD
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