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Financial Accounting > Unit 1 > Flashcards

Unit 1 Flashcards

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1
Q

Accounting

A

The process of identifying, measuring, recording, communicating a organizations financial activity to it’s users

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2
Q

Internal users

A

plan, organize and operate the economic activies of an organization.

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3
Q

managerial accounting

A

provides financial information thatserves the decision making needs of internal users

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4
Q

financial accounting

A

provides financial information that serves the needs of external users.

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5
Q

external users

A

Investors, creditors, labour unions, customers. Users who do not work for the company.

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6
Q

organization

A

a group of individuals who come together to achieve mutual goals and objectives

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7
Q

business organization

A

provides a service or sells a product for profit

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8
Q

non-business organization

A

exists to meet various societal needs and it does not have the goal of earning a profit

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9
Q

proprietorship

A

a business owned by one person. Business and owner are not a seperate legal entity. Unlimited liability

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10
Q

partnership

A

a business owned by 2+ individuals. Not a seperate legal entity. Unlimited liability

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11
Q

corporation

A

a business owned by 2+ individuals who are shareholders. Share holders own shares. Seperate legal entity. Limited liability. Corporation managed by a board of directors which is elected by shareholders

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12
Q

shares

A

units of ownership in a corporation

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13
Q

common shares

A

when there is only 1 type of share in a corporation.

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14
Q

board of directors

A

manages a corporation, but does not participate in day-to-day. Hires officers of corporation for this.

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15
Q

hire officers of a corporation

A

President, VP finance, VP marketing, VP production

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16
Q

PE (private enterprise)

A

corporation whose shares are not available for public sale

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17
Q

PAE (publicly accountable enterprise

A

corporation whose shares are available for public sale

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18
Q

goal of accounting

A

that information provided to users is useful

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19
Q

GAAP (Generally Accepting Accounting Principles)

A

ethics that guide accountants to report information that is relevant and faithfully represents a business’s financial activitiesé 6 characteristics, 9 principles

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20
Q

characteristics of GAAP

A
  1. relevancy, 2. faithful representation, 3. comparability, 4. verifiability, 5. timeliness, 6. understandability
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21
Q

Relevancy

A

characteristic of GAAP. Information is relevant to decision making process

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22
Q

faithful representation

A

characterstic of GAAP. Information is complete, neutral and error free. Does not omit information.

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23
Q

verifiable

A

characterstic of GAAP. others could confirm information faithfully represents the financial activity of organization.

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24
Q

comparability

A

characterstic of GAAP. All information uses similar accounting practices

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25
timeliness
characterstic of GAAP. Information is provided in time to be useful.
26
understandability
characterstic of GAAP. information is clear and easy to understand
27
business entity
GAAP principle. Each entity keeps seperate financial records.
28
consistency
GAAP principle. A business uses the same accounting procedures and policies from period to period.
29
cost
GAAP principle. Economic transaction are recorded at actual original cost (the historic cost principle)
30
full disclosure
GAAP principle. accounting information communicates all information needed for users to make financial decisions.
31
going concern
GAAP principle. assumes a business will continue to exist in the forseeable future.
32
matching
GAAP principle. Financial transactions are recorded in the period in which they occur/or were realized
33
materiality
GAAP principle. requires businesses to use proper accounting procedures only for items that will affect decisions made by users. Ex. stapler an asset or expense.
34
monetary unit
GAAP principle. financial transactions are recorded in a stable unit of money
35
recognition
GAAP principle. revenue is reported in period it is earned; expense reported in period it is incurred. Not necessarily when cash is received or payed.
36
IFRS
Internation Financial Reporting Standards. for PAEs. GAAP based on this. Issued by IASB
37
IASB
International Accounting Standards Board.. Global. Tries to regulate accounting standards through a process of open and transparent discussions among corporations, financial institutions, and accounting firms around the world.
38
ASPE
Accounting Standards for Private Entreprise. less arduous that IFRS. based on GAAP
39
AcSB
Canadian Accounting Standards Board. Governs accounting standards in Canada. Developped ASPE
40
financial statements
Income Statement; Statement Changes in Equity; Balance Sheet; Statement of Cash Flow (SCF); Notes
41
Income Statement
Revenues less expenses equals a net income or net loss.
42
revenue
services or product are exchanged for an asset
43
expenses
the assets used in the process to obtain revenues
44
statement changes in equity
shows how share capitol, retained earnings change during a period
45
Issuing of shares
when share holders buy shares
46
retained earnings
accumulation of all net incomes of a business over it's life.
47
Dividends
distribution of retained earnings to share holders. How much they get depends on how many shares they own.
48
Balance Sheet
shows assets, liabilities, equity, for a business at a given point in time. shows the accounting equation and double-entry accounting
49
assets
economic resources that can have future benefits. Can be financed through liability or equity.
50
liaibility
obligation to pay for an asset in the future
51
Statements of Cash Flow (SCF)
for a period of time. Details the inflow and outflow of cash for operating activities; financing activities; investing activities
52
Notes
accompany financial statements. Give additional detail.
53
Operating Activities
the day-to-day activities to generate net income
54
Investing activities
buying assets in order to create more revenue
55
financing activities
raises money to invest in assets
56
accounting equation
Assets = Liabilities + Equity
57
financial transaction
an economical echange recorded through source documentation.
58
double-entry accounting
with each financial transaction there is a change on each side of the accounting equation. This is double-entry accounting.
59
fiscal year
end of a 12 month period
60
annual financial statements
produced at year-end (end of 12 month fiscal year)
61
interim financial statements
may be produced at interim (ex. every 3 months) especially for corporations.

Financial Accounting (10 decks)

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