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Flashcards in vocabulary accounting Deck (53):
1

Accounting

A system that collects and processes financial information about an organization and reports that information to decision makers.

2

Accounting Entity

is the organization for which financial data are to be collected.

3

Accounting Period

the time period covered by the financial statement.

4

Audit

an examination of the financial reports to ensure that they represent what they claim and conform with GAAP

5

Balance Sheet

reports the amount of assets/ liabilities/ and stockholders' equity of an accounting entity at a point in time.

6

Basic Accounting Equation

Assets = Liabilities + stockholders' equity

7

Financial Accounting Standards Board (FASB)

is the private sector body given the primary responsibility to work out the detailed rules that become generally accepted accounting principles.

8

Generally Accepted Accounting Principles (GAAP)

are the measurement rules used to develop the information in financial statements

9

Income Statement

reports the revenues less the expenses of the accounting period.

10

Notes

provide supplemental information about the financial condition of a company without which the financial statements cannot be fully understood.

11

Public Company Accounting Oversight Board (PCAOB)

the private sector body given the primary responsibility to issue detailed auditing standards.

12

Securities and Exchange Commission (SEC)

the U.S. government agency that determines the financial statements that public companies must provide to stockholders and the measurement rules that they must use in producing those statements.

13

Statement of Cash Flows

reports inflows and outflows of cash during the accounting period in the categories of operating/ investing/ and financing.

14

Statement of retained Earnings

reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period.

15

Account

a standardized format that organizations use to accumulate the dollar effect of transactions on each financial statement item

16

Assets

are economic resources with probable future benefits owned by the entity as a result of past transactions.

17

Conservatism

exception suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses.

18

Continuity Assumption

states that businesses are assumed to continue to operate into the foreseeable future.

19

Contributed Capital

results from owners providing cash to the business

20

Credit

is on the right side of an account

21

Current Assets

are assets that will be used or turned into cash within one year. inventory is always considered a current asset regardless of the time needed to produce and sell it.

22

Current Liabilities

are obligations that will be settled by providing cash/ goods/ or services within the coming year

23

Debit

is on the left side of an account

24

Historical Cost Principle

requires assets to be recorded at historical cost-cash paid plus the current dollar value of all noncash considerations given on the date of exchange.

25

Journal Entry

an accounting method for expressing the effects of a transaction on accounts in a debits-equal-credits format.

26

Liabilities

are probable debts or obligations of the entity that results from past transactions / which will be paid with assets or services.

27

Materiality

exception suggests that small amounts that are not likely to influence a user's decision can be accounted for in the most cost-beneficial manner.

28

Primary Objective of External Financial Reporting

is to provide useful economic information about a business to help external parties make sound financial decisions.

29

Relevant Information

can influence a décision. timely and has predictive and or feedback value

30

Retained Earnings

refers to the cumulative earnings of a company that are not distributed to the owners and are reinvested in the business

31

Separate-Entity Assumption

states that business transactions are accounted for separately from the transactions of owners.

32

Stockholders' Equity

the financing provided by the owners and business operations

33

T-account

is a tool for summarizing transaction effects for each account/ determining balances/ and drawing inferences about a company's activities.

34

Transaction Analysis

the process of studying a transaction to determine its economic effect on the business in terms of the accounting equation

35

Unit-of-Measure Assumption

states that accounting information should be measured and reported in the national monetary unit.

36

Accrual Basis Accounting

records revenues when earned and expenses when incurred/ regardless of the timing of cash receipts or payments

37

Cash Basis Accounting

records revenues when cash is received and expenses when cash is paid

38

Gains

increases in assets or decreases in liabilities from peripheral transactions.

39

Losses

decreases in assets or increases in liabilities from peripheral transactions.

40

Matching Principle

requires that expenses be recorded when incurred in earning revenue

41

Operating Cycle

the time it takes for a company to pay cash to suppliers/ sell goods and services to customers/ and collect cash from customers.

42

Revenues

increases in assets or settlements of liabilities from ongoing operations

43

Time Period Assumption

indicates that the long life of a company can be reported in shorter time periods

44

Accrued Expenses

previously unrecorded expenses that need to be adjusted at the end of the accounting period to reflect the amount incurred and the related payable account.

45

Accrued Revenues

previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and the related receivable account

46

Adjusting Entries

entries necessary at the end of the accounting period to measure all revenues and expenses of that period

47

Closing Entry

transfers balances in temporary accounts to retained earnings and establishes zero balances in temporary accounts

48

Deferred Expenses

previously acquired assets that need to be adjusted at the end of the accounting period to reflect the amount of expense incurred in using the assets to generate revenue.

49

Deferred Revenues

previously recorded liabilities that need to be adjusted at the end of the accounting period to reflect the amount of revenue earned

50

Permanent Accounts

the balance sheet accounts that carry their ending balances into the next accounting period

51

Post-Closing Trial Balance

should be prepared as the last step of the accounting cycle to check that debits equal credits and all temporary accounts have been closed.

52

Temporary Accounts

income statement accounts that are closed to retained earnings at the end of the accounting period

53

Trial Balance

a list of all accounts with their balances to provide a check on the equality of the debits and credits.