click below
click below
Normal Size Small Size show me how
Financial Accounting
Financial Accounting: Ch. 1
Term | Definition |
---|---|
accounting | an information system that reports on the economic activities and financial condition of a business or other organization |
market | a group of people or entities organized to exchange items of value |
profit (income or earnings) | added value created in the transformation process |
financial resources | money |
investors | provide financial resources in exchange for ownership interests in businesses |
creditors | lend financial resources to businesses |
assets | the resources controlled by a business |
liquidation | the process by which, if a business ceases to operate, its remaining assets are sold and the sale proceeds are returned to the creditors and investors |
physical resources | natural resourses |
labor resources | intellectual and physical labor |
stakeholders | the many users of accounting information |
financial accounting | provide accounting information to external users |
managerial accounting | provide accounting information to internal users |
not-for-profit entities | organizations that are not motivated by profit |
financial accounting standards board (fasb) | privately funded organization with primary authority for establishing accounting standards in the u.s. |
generally accepted accounting principles (gaap) | measurement rules established by the fasb |
international accounting standards board (iasb) | address the need for a common set of financial standards - international financial reporting standards (ifrs) |
reporting entities | people or businesses accountants report on |
financial statements | |
elements | ten categories of financial statements |
accounts | detailed information about the elements is maintained in records |
liabilities | obligations a business has to its creditors |
stockholders | terms investors |
common stock | specific commitments made to the investors are described in certificates |
stockholders' equity | business' commitment to the stockholders |
retained earnings | increase in the business's commitments to its stockholders |
accounting equation | relationship between a business's asset and the claims on its assets is frequently expressed in an equality |
going concern | assumes that a business is able to continue its operations into the foreseeable future |
accounting event | economic occurrence that changes an enterprise's assets, liabilities, or stockholders' equity |
transaction | particular kind of event that involves transferring something of value between two entities |
asset source transaction | increases the business's assets (cash) and its stockholders' equity (common stock) |
double-entry bookkeeping | all transactions affect the accounting equation in at least two places |
asset exchange transaction | amount of total assets is not affected |
revenue | economic benefit a company obtains by providing costumers with goods and services |
asset use transactions | decrease the total amount of assets and the total amount of claims on assets (liabilities or stockholders' equity) |