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ACCT Ch. 1 Terms
Definitions
| Term | Definition |
|---|---|
| accounting | info system that provides reports to stakeholders about economic activities/condition of a business |
| accounting equation | Assets= Liabilities + Stockholder's equity |
| accounting period concept | data is recorded and summarized in a period process |
| accounts payable | liabilities for amounts incurred from purchases of products/services |
| accounts receivable | receivables created by selling merchandise/services on credit |
| adequate disclosure concept | requires financial statements to include all relevant data to understand financial condition and performance of a business |
| administrative expenses | expenses incurred in administration or general operations of business; not directly related to selling. |
| assets | resources owned by a business |
| balance sheet | assets, liabilities, and owner's equity as of specific date |
| bonds payable | long-term debt financing with face amount that is in the future with interest and is paid semiannually |
| business | organization in which basic resources are assembled and processed to provide goods and services |
| business entity concept | limits the economic data in the accounting system of a specific business or entity to date related directly to the activities of that business |
| business stakeholder | person that has interest in the economic performance of a business |
| capital stock | portion of a corporation's stockholders' equity contributed by owners in exchange for shares of stock |
| common stock | basic type of stock issued to stockholders of a corporation when there is only one class of stock |
| corporation | business organized under state of federal statutes as a separate legal entity |
| cost concept | determines the amount initially entered into the accounting records for purchases |
| cost of goods sold | cost of products sold; cost of sales |
| dividends | distributions of the earnings of a corporation to its stockholders |
| expenses | costs used to earn revenue |
| fees earned | revenues received from providing services |
| financial accounting | area of accounting that focuses on recording transactions and events of general financial statements can be prepared |
| FASB | Financial Accounting Standards Board. body that has primary responsibility for developing accounting principles |
| financial statements | financial reports that summarize the effects of events on a business |
| financing activities | business activities that involve obtaining funds to begin and operate a business |
| GAAP | Generally Accepted Accounting Principles. rules for the way financial statements should be prepared |
| going concern concept | assumes a business will continue operating for an indefinite period of time |
| income statement | summary of the revenue and expenses for specific period of time |
| intangible assets | long-lived assets that are useful in operations of a business, not held for sale, and are without physical qualities |
| interest payable | liability to pay interest |
| IASB-International Accounting Standards Board | establishes accounting principles and practices for companies outside of the U.S. |
| investing activities | activities that involve obtaining the necessary resources to start and operate the business |
| liabilities | rights of creditors that represent a legal obligation to repay and amount borrowed according to terms of borrowing agreement. |
| LLC- Limited Liability Company | form of a corporation that combines attributes of a partnership and a corporation. |
| low-cost strategy | company designs and produces products/services at a lower cost than competitors. |
| managerial accounting | aids management in making financing, investing, and operating decisions for the company. |
| manufacturing business | changes basic inputs into products that are sold to individual customers. |
| matching concept | requires expenses of a period to be matched with the revenue generated during that period |
| merchandising business | businesses that sell products they purchase form other businesses to customers |
| net income | excess of revenues over expenses |
| net loss | excess of expenses over revenues |
| note payable | short/long-term financing that requires payment of the amount borrowed plus interest |
| objectivity concept | requires accounting records and data reported in financial statements be based on objective evidence. |
| operating activities | involve using the business's resources to implement its business strategy. |
| owner's equity | financial rights of the owner |
| partnership | business owned by two or more individuals. |
| premium-price strategy | company tries to design and produce products or services that serve unique market needs, allowing it to charge premium pricing. |
| prepaid expenses | assets resulting from the prepayment of future expenses (insurance/rent) that are expected to become expenses over time or through the normal operations of the business |
| profit | excess of the amounts received from customers for goods or services and the amounts paid for the inputs to provide the good/service. |
| proprietorship | business owned by one individual |
| rate of return on assets | profitability measure that is computed by dividing net income before taxes and interest expense by average total assets. |
| retained earnings | net income retained in a corporation |
| statement of retained earnings | a summary of the changes in the retained earnings of a corporation for a specific period of time |
| revenue | increase in assets from selling products or services to customers |
| sales | revenues received from selling products; cash sales and sales on account |
| SEC-Securities and Exchange Commission. | agency of the U.S. government that has authority over accounting/financial disclosers for corporations whose stock is traded/sold to the public. |
| selling expenses | costs directly related to the selling of product/service; sales salaries, advertising expenses |
| service business | provides services rather than products |
| statement of cash flows | summary of cash receipts and cash payments for a specific period of time |
| statement of financial condition | reports the financial condition as of a point in time (balance sheet) |
| stockholders | investors who purchase stock in a corporation |
| stockholders' equity | stockholders' rights to the assets of a business |
| tangible assets | machinery, buildings, computers, office furnishings, trucks, and automobiles that have physical characteristics. |
| unit of measure concept | concept requiring that economic data be recorded in dollars |
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