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ACCT Ch. 1 Terms

Definitions

TermDefinition
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
Created by: 1153721367976199