The information system that measures business activities, processes the information into reports and communicates the results to decision makers
The field of accounting that focuses on providing information for external decision makers
The field of accounting that focuses on providing information for internal decision makers
Any person or business to whom a business owes money
Certified Public Accountants (CPAs)
Licensed professional accountants who serve the general public
Certified Management Accountants (CMAs)
Certified professionals who specialize in accounting and financial management knowledge. They typically work for a single company
Financial Accounting Standards Board (FASB)
The private organization that oversees the creation and governance of accounting standards in the U.S.
Securities and Exchange Commission (SEC)
U.S. government agency that oversees the U.S. financial markets.
Generally Accepted Accounting Principles (GAAP)
Accounting guidelines, currently formulated by the FASB; the main U.S. accounting rule book.
Providing information that is complete, neutral and free from error.
Economic Entity Assumption
An organization that stands apart as a separate economic unit.
A business with a single owner. Owner is personally liable.
A business with two or more owners and not organized as a corporation. Partners are personally liable.
A business organized under state law that is a separate legal entity. Stockholders are not personally liable
Limited-Liability Company (LLC)
A company in which each member is only liable for his or her own actions. Members are not personally liable.
A person who owns stock in a coporation
States that acquired assets and services should be recorded at their actual cost (historical cost).
Going concern assumption
Assumes that the entity will remain in operation for the foreseeable future.
Monetary Unit Assumption
requires the items on the financial statements to be measured in terms of a monetary unit.
International Financial Reporting Standards (IFRS)
A set of global accounting guidelines, formulated by the IASB
International Accounting Standards Board (IASB)
The private organization that oversees the creation and governance of IFRS
An examination of a company's financial statements and records.
Sarbanes-Oxley Act (SOX)
Requires management to review internal control and take responsibility for the accuracy and completeness of their financial reports
The basic tool of accounting, measuring the resources of the business and the claims to those resources.
(Assets = Liabilities + Equity)
Economic resources that are expected to benefit the business in the future. Something the business owns or has control of.
Debts that are owed to creditors.
The owners' claims to the assets of the business
Owner contributions to a coporation
- Increases equity
- Amounts earned from delivering goods or services to customers
- The costs of selling goods or services
- Decreases equity
A distribution of a corporation's earnings to stockholders
Represents the basic ownership of a corporation
Equity earned by profitable operations of a corporation that is not distributed to stockholders.
(Net Income - Dividends + Previous Years RE)
The result of operations that occurs when total revenues are greater than total expenses.
The result of operations that occurs when total expenses are great than total revenues.
An event that affects the financial position of the business and can be measured with faithful representation
A short-term liability that will be paid in the future
The right to receive cash in the future from customers for goods sold or for services performed.
Business documents that are used to communicate information needed to make business decisions.
- Evaluates profitability
- Reports the revenues, expenses and net income or loss of the business for a specific period.
(Revenues - Expenses = Net Income or Loss)
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)
- 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)
Statement of Cash Flows
- Shows the change in cash
- Reports on a business's cash receipts and cash payments for a specific period
Return on Assets (ROA)
Measures how profitably a company uses its assets.
ROA = Net income / Average total assets.