Chapter 1 Flashcards Preview

Accounting 3000 > Chapter 1 > Flashcards

Flashcards in Chapter 1 Deck (44):
1

Accounting

The information system that measures business activities, processes the information into reports and communicates the results to decision makers

2

Financial Accounting

The field of accounting that focuses on providing information for external decision makers

3

Managerial accounting

The field of accounting that focuses on providing information for internal decision makers

4

Creditor

Any person or business to whom a business owes money

5

Certified Public Accountants (CPAs)

Licensed professional accountants who serve the general public

6

Certified Management Accountants (CMAs)

Certified professionals who specialize in accounting and financial management knowledge. They typically work for a single company

7

Financial Accounting Standards Board (FASB)

The private organization that oversees the creation and governance of accounting standards in the U.S.

8

Securities and Exchange Commission (SEC)

U.S. government agency that oversees the U.S. financial markets.

9

Generally Accepted Accounting Principles (GAAP)

Accounting guidelines, currently formulated by the FASB; the main U.S. accounting rule book.

10

Faithful Representation

Providing information that is complete, neutral and free from error.

11

Economic Entity Assumption

An organization that stands apart as a separate economic unit.

12

Sole proprietorship

A business with a single owner. Owner is personally liable.

13

Partnership

A business with two or more owners and not organized as a corporation. Partners are personally liable.

14

Corporation

A business organized under state law that is a separate legal entity. Stockholders are not personally liable

15

Limited-Liability Company (LLC)

A company in which each member is only liable for his or her own actions. Members are not personally liable.

16

Stockholders

A person who owns stock in a coporation

17

Cost principle

States that acquired assets and services should be recorded at their actual cost (historical cost).

18

Going concern assumption

Assumes that the entity will remain in operation for the foreseeable future.

19

Monetary Unit Assumption

requires the items on the financial statements to be measured in terms of a monetary unit.

20

International Financial Reporting Standards (IFRS)

A set of global accounting guidelines, formulated by the IASB

21

International Accounting Standards Board (IASB)

The private organization that oversees the creation and governance of IFRS

22

Audit

An examination of a company's financial statements and records.

23

Sarbanes-Oxley Act (SOX)

Requires management to review internal control and take responsibility for the accuracy and completeness of their financial reports

24

Accounting Equatin

The basic tool of accounting, measuring the resources of the business and the claims to those resources. 

(Assets = Liabilities + Equity)

25

Asset

Economic resources that are expected to benefit the business in the future. Something the business owns or has control of.

26

Liabilities

Debts that are owed to creditors.

27

Equity

The owners' claims to the assets of the business

28

Contributed Capital

Owner contributions to a coporation

29

Revenues

  • Increases equity
  • Amounts earned from delivering goods or services to customers

30

Expenses

  • The costs of selling goods or services
  • Decreases equity

31

Dividend

A distribution of a corporation's earnings to stockholders

32

Common Stock

Represents the basic ownership of a corporation

33

Retained Earnings

Equity earned by profitable operations of a corporation that is not distributed to stockholders.

(Net Income - Dividends + Previous Years RE)

34

Net Income

The result of operations that occurs when total revenues are greater than total expenses.

35

Net Loss

The result of operations that occurs when total expenses are great than total revenues.

36

Transaction

An event that affects the financial position of the business and can be measured with faithful representation

37

Accounts Payable

A short-term liability that will be paid in the future

38

Accounts Receivable

The right to receive cash in the future from customers for goods sold or for services performed.

39

Financial Statements

Business documents that are used to communicate information needed to make business decisions.

40

Income Statement

  • Evaluates profitability
  • Reports the revenues, expenses and net income or loss of the business for a specific period.

(Revenues - Expenses = Net Income or Loss)

41

Statement of Retained Earnings

  • Shows the amount of earnings that were kept and reinvested in the company
  • Reports how the company's retained earnings balance changed from the beginning to the end of the period.

 

(Beg. Retained Earnings + Net Income or Loss - Dividends

= End Retained Earnings)

42

Balance Sheet

  • Details the economic resources the company has.
  • Reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.

(Assets = Liabilities + Stockholders' Equity)

43

Statement of Cash Flows

  • Shows the change in cash
  • Reports on a business's cash receipts and cash payments for a specific period

44

Return on Assets (ROA)

Measures how profitably a company uses its assets.

ROA = Net income / Average total assets.