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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) |
Created by:
lizhopper2
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