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Accounting Chapter 1
| Term | Definition |
|---|---|
| account payable | the liability created by a purchase on account |
| account receivable | an asset, which is a claim against the customer created by selling merchandise on credit |
| accounting | information system that provides reports to stakeholders about the economic activities and condition of a business |
| accounting principles and assumptions | provide the framework upon which accounting standards are constructed |
| accounting equation | Assets= SUM(Liabilities + Equity) |
| Accounting Standards Codification | FASB database that contains accounting standards that make up GAAP |
| Accounting Standards Updates | published changes to accounting standards that become updates to the ASC |
| arm's length transactions | transactions between two independent parties |
| assets | resources owned by a business |
| balance sheet | a list of assets, liabilities, and stockholder's equityas of a specific date |
| business | an organization in which basic resources are assembled to provide goods/services to customers |
| business entity assumption | limits economic data in the accounting system to data related directly to the activities of the business |
| business transaction | economic event or condition that directly changes an entity's financial condition affects its results of operations |
| common stock | an account representing the rights of investors in a corporation |
| comparability | consistent reporting that allows users to identify similarities and differences among reported items |
| corporation | business organized under state or federal statutes as a separate legal entity |
| cost principle | an asset should be recorded and maintained in the accounting records at its initial transaction price |
| data analytics | science of analyzing large amounts of data to discover patterns for decision making |
| dividends | distribution of earnings to stockholders |
| equity | an owner's claim to a business |
| ethics | moral principles that guide behavior |
| expense recognition principle | requires expenses be recorded in the same period as the related revenue |
| expenses | assets used up to generate revenue |
| faithful representation | requires info accurately reflects an entity's economic activity or condition |
| financial accounting | A branch of accounting concerned with the summary, analysis, and reporting of financial transactions of a business |
| Financial Accounting Standards Board (FASB) | authoritative body that has the primary responsibility for developing accounting principles |
| financial statements | financial reports that summarize the effects of events on a business |
| financing activities | a company obtains funds to start and operate tye company |
| fiscal year | annual accounting period adopted by a business |
| generally accepted accounting principles (GAAP) | collection of accounting standards, principles, and assumptions define how financial info will be reported |
| general purpose financial statements | financial accounting report distributed to external users |
| going concern assumption | requires that financial reports be prepared assuming the entity will continue operating |
| historical cost principle | an asset should be recorded and maintained in the accounting records at its initial transaction price |
| income statement | summary of revenue and expenses for a specific period of time |
| interest revenue | earnings received for interest |
| International Accounting Standards (IASB) | issues financial reporting standards for many countries outside the U.S. |
| investing activities | acquires long term assets for use in the oprtating acitivites of the company |
| liabilities | what you owe |
| limited liability company (LLC) | a business consisting of 1 or more people filing an operating agreement with a state to conduct business |
| managerial accounting | uses both historical and estimated data in providing info that management uses in their jobs |
| manufacturing business | changes basic inputs into products that are sold to customers |
| measurement principle | amounts be objective and verifiable |
| monetary unit assumption | accounting assumption that requires that financial reports be expressed in a single monetary unit |
| natural business | a fiscal year that ends when business activities have reached the lowest point in an annual operating cycle |
| net income | revenue exceed expenses |
| net loss | expenses exceed revenues |
| operating activities | company generates revenue from customers |
| owner's equity | the equity for a proprietorship, partnership, or LLC |
| partnership | business form consisting of two or more persons conducting business as co-owners for profit |
| prepaid expenses | assets created by making advanced payments for expense items the will be used in the business in the future |
| private accounting | accountants are employed by a business firm or non profit |
| profit | amounts received from customers minus amounts paid for inputs |
| proprietorship | business that is owned by 1 individual |
| public accounting | accountants and their staff provide services on a fee basis |
| Public Company Accounting Oversight Board (PCAOB) | a new oversight body for the accounting profession that was established by the Sarbanes-Oxley Act |
| ratio of liabilities to stockholder's equity | how much of the company is financed by debt and equity |
| rent revenue | earnings from property that us leased to others |
| report form | a form of balance sheet with liabilities and equity below the assets |
| retail businesses | business that purchases products from other businesses and sells them to customers |
| retained earnings | an account representing the net income retained in a corporation |
| retained earnings statement | a summary of the changes in retained earnings in a corporation during a specific period of time |
| revenue | amount earned from providing services or selling goods to customers |
| revenue recognition principle | requires revenues are recorded when earned |
| sales | total amount charged customers for merchandise sold |
| Sarbanes-Oxley Act (SOX) | restore public confidence and trust in the financial statements of companies |
| Securities and Exchange Commission (SEC) | a U.S. agency that has authority over the accounting and financial disclosure for companies whose stock are traded and sold to the public |
| service businesses | provide services to customers |
| statement of cash flows | summary of cash receipts and payments during a specific period of time |
| statement of stockholder's equity | summary of the changes in stockholder's equity in a corporation during a specific period of time |
| timeliness | distribution of financial reports in time to influence's a user's decision |
| time period assumption | allows a company to report its economic activities on a regular basis |
| understandability | requires that financial info reports be clear and concise |
| verifiability | allows users to agree on the meaning of reported items |
| managerial accounting | The area of accounting concerned with providing internal users with information is called |
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