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ACFM 321 Chapter 1
| Term | Definition |
|---|---|
| Financial Accounting | Provides relevant info to various external users and the primary focus is on financial info provided by profit-oriented companies to their present and potential investors and creditors |
| Financial Intermediaries | Financial analysts, stockbrokers, mutual fund managers, and credit rating organizations to provide advice to investors and creditors or make decisions on their behalf |
| Capital Markets | Mechanisms to help an economy allocate resources efficiently |
| Corporation | Dominant form that acquires capital from investors in exchange for ownership interest and from creditors by borrowing |
| Accrual Accounting | Measures income according to entity's accomplishments and resource sacrifices during period from transactions related to providing goods/services to customers, regardless of when cash is received or paid |
| Cash-Basis Accounting | Measures income as difference between cash receipts and cash disbursements during a reporting period from transactions related to providing goods/services to customers |
| Net Operating Cash Flow | Difference between cash receipts and cash disbursements from transactions related to providing goods/services to customers during a reporting period |
| Net Income | All revenues/gains minus all expenses/losses reported in the income statement |
| GAAP | Set of both broad and specific guidelines that companies should follow when measuring and reporting info in their financial statements and related notes |
| Securities and Exchange Commission | Has the authority to set accounting standards for companies, but it relies on private sector to do so |
| Financial Accounting Standards Board | Current private sector body that has been delegated the task of setting accounting standards |
| Financial Accounting Foundation | Responsible for selecting members of FASB and its Advisory Council, ensuring adequate funding of FASB activities, and exercising general oversight of FASB's activities |
| Emerging Issues Task Force | Responsible for providing timely responses to emerging financial reporting issues within framework of existing GAAP, addresses implementation issues |
| Conceptual Framework | Deals with theoretical and conceptual issues and provides an underlying structure for current and future accounting and reporting standards |
| FASB Accounting Standards Codification | Integrates and topically organizes all relevant accounting pronouncements comprising GAAP in a searchable, online database |
| Governmental Accounting Standards Board | Responsible for developing accounting standards for governmental units such as states and cities |
| International Accounting Standards Committee | Umbrella organization formed to develop global accounting standards |
| International Accounting Standards Board | Objectives are to develop a single set of high-quality, understandable global accounting standards, to promote use of those standards, and to bring about convergence of national accounting standards and International Accounting Standards |
| International Financial Reporting Standards | Developed by IASB and used by more than 120 jurisdictions |
| Private Company Council | Determines whether changes to existing GAAP are necessary to meet needs of users of private company financial statements, but a proposed exception/modification for them must be endorsed by FASB |
| Auditors | Independent professionals who render an opinion about whether financial statements fairly present company's financial position, performance and cash flows in compliance with GAAP |
| Certified Public Accountant | Licensed individuals who can represent that financial statements have been audited in accordance with GAAP |
| Principles-Based Accounting Standards | Approach to standard setting stresses professional judgement, as opposed to following a list of rules |
| Rules-Based Accounting Standards | Standards that specify appropriate accounting treatments using precise thresholds or definitions and requiring little professional judgement for interpretation |
| Ethics | Code/moral system that provides criteria for evaluating right from wrong |
| Decision Usefulness | Quality of being useful to decision making |
| Relevant | One of the primary decision-specific qualities that make accounting info useful; made up of predictive value and or feedback value and timeliness |
| Predictive/Confirmatory Value | Confirmation of investor expectations about future cash-generating ability |
| Materiality | Has qualitative/quantitative characteristics that make it matter for decision-making, depends on the relative dollar amount of transaction |
| Faithful Representation | Exists when there is agreement between a measure or description and phenomenon it purports to represent, requires info to be complete, neutral, and free from error |
| Comparable | Info helps users see similarities and differences among events and conditions |
| Consistent | Info permits valid comparisons if measured and reported same way in each time period |
| Verifiable | Considers if different knowledgeable and independent measures would reach consensus about whether info is representationally faithful |
| Timely | Info that is available to users early enough to allow its use in decision process |
| Understandable | Info within context of decision being made that users can comprehend |
| Cost Effective | Perceived benefit of increased decision usefulness exceeds the anticipated cist of providing that info |
| Assets | Present right of entity to economic benefit |
| Liabilities | Present obligation of entity to transfer economic benefit |
| Equity | Shareholders' or stockholders', it is residual interest in assets of entity that remains after deducting its liabilities |
| Investments By Owners | Increases in equity of particular business enterprise resulting from transfers to it from other entities of something of value to obtain or increase ownership interests in it |
| Distributions To Owners | Decreases in equity of entity resulting from transferring assets, rendering services, or incurring liabilities by entity to owners |
| Comprehensive Income | Change in equity of a business enterprise during a period from transactions and other events/circumstances from nonowner sources; includes all changes in equity during a period except those resulting from investments by owners and distributions to owners |
| Revenues | Inflows or other enhancements of assets of entity or settlements of its liabilities from delivering or producing goods, rendering services, or carrying out other activities |
| Expenses | Outflows or other using up of assets of entity or incurrences of its liabilities from delivering or producing goods, rendering services, or carrying out other activities |
| Gains | Increases in equity from transactions and other events/circumstances affecting entity except those that result from revenues/investments by owners |
| Losses | Decreases in equity from transactions and other events/circumstances affecting entity except those that result from expenses/distributions to owners |
| Economic Entity Assumption | Presumes that economic events can be identified specifically within economic entity, keeping business separate from individual |
| Going-Concern Assumption | In absence of info to contrary, it is anticipated that business will operate indefinitely |
| Periodicity Assumption | Allows life of company to be divided into artificial time periods to provide timely info |
| Monetary Unit Assumption | States that financial statement elements should be measured in a particular monetary unit |
| Recognition | Process of admitting info into basic financial statements |
| Revenue Recognition | Companies recognize revenue when goods/services are transferred to customers for amount company expects to be entitled to receive |
| Expense Recognition | Cause and Effect, Associate Expense with Revenues Recognized, Systematic and Rational Allocation, Without Regard to Related Revenues |
| Historical Cost | Bases measurements on amount given/received in original exchange transaction |
| Depreciated/Amortized Cost | Reduces historical cost to reflect depreciation recognized to date |
| Net Realizable Value | Estimated selling prices of inventory in ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation |
| Current Cost | Costs that would be incurred to purchase or reproduce an asset |
| Present Value | Bases measurement on future cash flows discounted for time value of money |
| Fair Value | Bases measurement on price that would be received to sell assets or transfer liabilities in an orderly market transaction |
| Entry Price | Price that company would expect to pay to obtain an asset or receive to assume a liability |
| Exit Price | Price that a company would expect to receive when an asset is sold or pay to settle a liability |
| Full-Disclosure Principle | Financial reports should include any info that could affect decisions made by external users |
| Parenthetical/Modifying Comments | Supplemental info disclosed on face of financial statements |
| Disclosure Notes | Additional insights about company operations, accounting principles, contractual agreements, and pending litigation written in notes that accompany financial statements |
| Supplemental Schedules/Tables | Reports containing more detailed info than is shown in primary financial statements |
| Revenue/Expense Approach | Recognition and measurement of revenues and expenses are emphasized; with balance sheet accounts adjusted as necessary to reflect revenues and expenses |
| Asset/Liability Approach | Recognition and measurement of assets and liabilities drives revenue and expense recognition |
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