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Financial Acct ch1
Principles of Financial Accounting Study Deck (Chapter 1)
| Term | Definition |
|---|---|
| Financial Accounting | Measurement of business activities of a company and communication of those measurements to decision makers outside of the company (external reporting) |
| Managerial Accounting | Measurement of business activities of a company and communication of those measurements to managers (internal reporting) |
| Common Stock | A share of ownership of the company and, with it, the right to share in the company's profits |
| Contributed Capital | Money gained from issuing common stock |
| Assets | Resources of the company, including supplies, inventory, buildings, land, or investments Assets = Liabilities + Stockholder Equity |
| Liabilities | Amounts owed to creditors, usually involving claims that must be paid by a specific date |
| Stockholder Equity | An owner's claim to resources, coming from two primary sources: contributions from the owners themselves and net resources generated by company operations Stockholder Equity = Assets - Liabilities |
| Revenue | The amounts recognized when the company sells products or provides services |
| Expenses | Costs of providing products and/or services and other business activities during a current period. Does not include dividends |
| Net Income/Earnings/Profit | The difference between revenues and expenses |
| Net Loss | When expenses exceed revenue during a time period |
| Dividends | Cash payments to stockholders. These are NOT an expense. |
| Corporation | A company that is legally separate from its owners. |
| Sole Proprietorship | A business owned by one person |
| Partnership | A business owned by two or more persons |
| Financial Statements | Periodic reports published by the company for the purpose of communicating a company's business activities to those outside of the company |
| Income Statement | A financial statement that reports the company's revenues and expenses over a time interval |
| Retained Earnings | All net income minus all dividends over the life of the company. Begins at 0 when a company is founded |
| Generally Accepted Accounting Principles (GAAP) | Formal standards that have been established for the purpose of financial reporting |
| Securities and Exchange Commission (SEC) | An agency created in 1934 to enforce accounting and disclosure requirements for issuance and sale of securities (stocks and bonds) to the public |
| Financial Accounting Standards Board (FASB) | An independent, private-sector body that has been given responsibility by the SEC for establishing accounting and reporting standards within the United States |
| International Accounting Standards Board (IASB) | A board established to issue global standards for accounting to make practices more comparable worldwide |
| International Financial Reporting Standards (IFRS) | International standards created by the IASB to make accounting more comparable worldwide |
| Annual Reports | Financial statements that are legally requirement of all companies with publicly traded securities, published each fiscal year |
| Disclosure Notes | Supporting discussion, calculations, and schedules within financial statements - may include details such as investments, inventory, debt, taxes, etc. |
| Summary of Significant Accounting Policies | Usually the first disclosure note following financial statements, revealing which method of accounting was used for the financial statement |
| Management's Discussion and Analysis (MD&A) | Discussion and analysis provided by the company's management, including trends, events, and uncertainties involving the company |
| Executive Compensation | Detailed information about how much the company's top executives are paid, including base salary and other compensation |
| Ethics | A code or moral system that provides criteria for evaluating right and wrong behavior |
| Sarbanes-Oxley Act (SOX) | An act providing for the regulation of auditors and the types of services they furnish to clients, increasing accountability of corporate executives, addressing conflicts of interest, and providing penalties for violators |
| Private Accounting | Providing accounting services to a company that employs you |
| Public Accounting | Providing accounting services to a company that does not employ you directly, usually through auditing, tax preparation/planning, and business consulting |
Created by:
Natticus
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