Chapter 1 - Accounting in Action Flashcards
(35 cards)
Accounting
the information system that identifies, records and communicates the economic events of an organization to interested users
Assets
Resources a business owns
Auditing
The examination of financial statements by a certified public accountant in order to express an opinion as to the fairness of presentation
Balance Sheet
a financial statement that reports the assets, liabilities, and owner’s equity at a specific date
Basic Accounting Equation
Assets = liabilities + owner’s equity
Bookkeeping
a part of the accounting process that involves only the recording of economic events
Convergence
the process of reducing the differences between US GAAP and IFRS
Corporation
A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock
Drawings
withdrawal of cash or other assets from an unincorporated business for the personal use of the owner(s)
Economic Entity Assumption
An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities
Ethics
The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair
Expanded Accounting Equation
Assets= Liabilities + Owner’s Capital - Owner’s drawings + Revenues - expenses
Expenses
The cost of assets consumed or services used in the process of earning revenue
Fair Value Principle
an accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability)
Faithful Representation
numbers and descriptions match what really existed or happened– they are factual
Financial Accounting
the field of accounting that provides economic and financial information for investors, creditors, and other external users
Financial Account Standards Board (FASB
a private organiztion that establishes generally accepted accounting principles in US (GAAP)
Generally Accepted Accounting Principles (GAAP)
Common standards that indicate how to report economic events
Historical Cost Principle
an accounting principle that states that companies should record assets at their cost
Income Statement
a financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time
International Accounting Standards Board (IASB)
an accounting standard-setting body that issues standards adopted by many countries outside of the US
Investments by Owner
the assets an owner puts into the business
Liabilities
Creditor claims against total assets
Managerial Accounting
the field of accounting that provides internal reports to help users make decisions about their companies
