Flashcards in vocabulary accounting Deck (53):
A system that collects and processes financial information about an organization and reports that information to decision makers.
is the organization for which financial data are to be collected.
the time period covered by the financial statement.
an examination of the financial reports to ensure that they represent what they claim and conform with GAAP
reports the amount of assets/ liabilities/ and stockholders' equity of an accounting entity at a point in time.
Basic Accounting Equation
Assets = Liabilities + stockholders' equity
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.
Generally Accepted Accounting Principles (GAAP)
are the measurement rules used to develop the information in financial statements
reports the revenues less the expenses of the accounting period.
provide supplemental information about the financial condition of a company without which the financial statements cannot be fully understood.
Public Company Accounting Oversight Board (PCAOB)
the private sector body given the primary responsibility to issue detailed auditing standards.
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.
Statement of Cash Flows
reports inflows and outflows of cash during the accounting period in the categories of operating/ investing/ and financing.
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.
a standardized format that organizations use to accumulate the dollar effect of transactions on each financial statement item
are economic resources with probable future benefits owned by the entity as a result of past transactions.
exception suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses.
states that businesses are assumed to continue to operate into the foreseeable future.
results from owners providing cash to the business
is on the right side of an account
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.
are obligations that will be settled by providing cash/ goods/ or services within the coming year
is on the left side of an account
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.
an accounting method for expressing the effects of a transaction on accounts in a debits-equal-credits format.
are probable debts or obligations of the entity that results from past transactions / which will be paid with assets or services.
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.
Primary Objective of External Financial Reporting
is to provide useful economic information about a business to help external parties make sound financial decisions.
can influence a décision. timely and has predictive and or feedback value
refers to the cumulative earnings of a company that are not distributed to the owners and are reinvested in the business
states that business transactions are accounted for separately from the transactions of owners.
the financing provided by the owners and business operations
is a tool for summarizing transaction effects for each account/ determining balances/ and drawing inferences about a company's activities.
the process of studying a transaction to determine its economic effect on the business in terms of the accounting equation
states that accounting information should be measured and reported in the national monetary unit.
Accrual Basis Accounting
records revenues when earned and expenses when incurred/ regardless of the timing of cash receipts or payments
Cash Basis Accounting
records revenues when cash is received and expenses when cash is paid
increases in assets or decreases in liabilities from peripheral transactions.
decreases in assets or increases in liabilities from peripheral transactions.
requires that expenses be recorded when incurred in earning revenue
the time it takes for a company to pay cash to suppliers/ sell goods and services to customers/ and collect cash from customers.
increases in assets or settlements of liabilities from ongoing operations
Time Period Assumption
indicates that the long life of a company can be reported in shorter time periods
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.
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
entries necessary at the end of the accounting period to measure all revenues and expenses of that period
transfers balances in temporary accounts to retained earnings and establishes zero balances in temporary accounts
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.
previously recorded liabilities that need to be adjusted at the end of the accounting period to reflect the amount of revenue earned
the balance sheet accounts that carry their ending balances into the next accounting period
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.
income statement accounts that are closed to retained earnings at the end of the accounting period