Accounting chapter 1 terms
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| Accounting | System that identifies success and failures.
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| Bookkeeping | Recording Transactions and events manually or electronically.
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| Financial Accounting(Public accounting) | Highest level is CPA(Certified public accountant)
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| Managerial accounting | Serves as the decision
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| Ethics | Beliefs that distinguish right from wrong.
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| Generally Accepted Accounting Principles(GAAP) | Rules that govern how accountants measure process, and communicate financial info.
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| Financial Accounting Standards Board (FASB) | A private sector group that sets both broad and specific principles.
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| Entity Concept | Keep track of the business separate than the owners.
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| Reliability Principle(Objectivity) | Account for transactions and events using measurable data.
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| Cost Principle | Actual historical amount cost is measurable.
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| Going Concern Concept | In operation for foreseeable future.
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| Stable/Monetary | unity concept (Stable $) Assume purchasing power is relatively stable.
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| Realization Principle (Revenue Recognition) | Record revenue as u earn it, not when cash comes in. Record expenses as the benefit is used up, not when the cash is paid.
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| Proprietorship | A single owner
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| Partnership | A business owned by 2 or more people.
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| Mutually Agency | 1 partner can in debit all of the debt.
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| Corporation | owned by stockholders
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| Assets | Things that have future value that a company owns or controls.
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| Accounts Recievalbe | The right to recieve money in the future b/c of something thats already been done.
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| Liabilities | The obligation to do something or pay somebody in the future for something already recieved.
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| Accounts payable | Obligation to pay someone in the future.
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| Accounting Equation | Assets= Liabilities+ Equity
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| Unearned Revenue | Obligation to do something.
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| Audit | Examines whether financial statements are prepared using GAAP. It does not attest to absolute accuracy of the statements.
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| Auditiors | Verify effectiveness of internal controls.
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| Balance Sheet | describes a companys financital postion types, and amounts of assets, liablities and equity at a point in time.
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| Business Equity Assumption | A buesiness is accounted for separately from other business entities including its owner.
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| Common Stock (Capital Stock) | When a corporation issues only one class of stock.
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| Conceptual framework and covergence | guide toward standard setting consist of: Objectives,Qualitative Characteristics,
Elements,Recognition and measurement
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| Objectives | Provide infor useful to investors, creditors and others
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| Equity | The owner's claim on assets
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| Events | Happenings that affect the accounting equation and are reliable measured.
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| Expanded Accounting Equation | Assets=Liabilities + Owner capital,subt Owner withdrawals, +Revenues subt Expenses
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| Expense recognition principle ( Matching principle) | A company record the expenses it incurred to generate the revenue reported.
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| Expenses | Cost necessary to earn revenues (Ex: cost of staffing, advertising, insurance services, use of supplies and utilites).
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| External transactions | Exchange of value between to entities, which yeild changes in the accounting equation. (Ex: Sale of Ad space by facebook).
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| Internal transactions | Exchanges w/in an entity, which may or may not affect the accounting equation. (Ex: facebook use of suppiles
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| External users | Shareholders(investors), lenders, directors, customers supplies, regulators, lawyers, brokers, and the press. Users of accounting info not directly involved wit the running organization.
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| Full disclosure principle | A company reports the details behind financial statements that would impact user decisions.
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| Income Statement | Describes a company's Revenues, & Expenses along with the resulting Net income or loss over a period of time due to earning activities.
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| Internal users | Those directly involved in managing & operating an organization.
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| International Accounting Standards | An independent group (consisting of individuals from many countries), issues International Financial Reporting Standards.
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| International Financial Reporting Standards | Identify perferred accounting practices.
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| Material Constraints | Only information that would influence the decsions of a reasonable person need to be disclosed.
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| Measurement/Cost principle | Accounting info is based on actual cost.
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| Monetary unit assumption | We can express transactons & events in monetary, or money/units.
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| Net Income | When revenues exceeds expenses.
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| Net loss | Occurs when expenses exceed revenues which decreases equity.
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| Owner Capital | Owner investments.
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| Owner investments | Assets an owner puts into the company & are included under the general account Owner Capital.
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| Owner Withdrawls | Assets an owner takes from the company for personal use.
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| Partnership | A business owned by 2 or more people.
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| Proprietorship | A business owned by one person.
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| Recordkeeping | The recording of transactions & events, either manually or electronical.
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| Return | Monies recieved from an investment; often in percent forms.
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| Return on total assets | Ratio reflecting operating effiency, defined as net income divided by average total assets for the period.
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| Return recognition principle | Prescribing that revenue is recognized when earned.
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| Revenues | Gross increase in equity from a company's business activities that earn income also called sales.
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| Risk | Uncertainity about an expected return.
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| Sarbanes Oxley Act(SOX) | Created public company accounting oversight board, regulates analyst conflicts, imposes corporate goverance requirements, enhances accounting & control disclosures, impacts insider transactions & executive loans, establishes new types of criminal conduct.
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| Securities & exchange | Federal agency congress has charged to set reporting rules for organization that sell ownerships shares to the public.
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| Shareholders | Owners of a corporation.
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| Shares | Equity of a corporation divided into ownership units.
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| Sole Propretorship | Business owned by 1 person.
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| Statement of Cash flows | A financial statement that lists cash in flows recipts & cash outlaws during a period arranged by operating , investing & financing.
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| Statement of Owner's equity | Report of changes in equity over a period. Adjusted for increases (owner investment & net income) & for decreases, withdrawls, and net loss.
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| Time period Assumption | Assumption that an organizations activitie can be divided into specific time periods such as months, quarters or years.
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| Withdrawls | Payment of cash or other assets from a proprietorship or partnership to its owner or owners.
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| Objectives | Provide info useful to investors, creditors and others.
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