Accounting Ch2
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
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| Accrual-basis acounting | Transactions that change a company's financial statements are recorded in the period in the events occur
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| Classified balance sheet | A balance sheet that contains a number of standard classifications and sections
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| Comparability | Ability to compare the accounting information of different companies because they use the same accounting principles
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| Consistency | Use of the same accounting principles and methods from year to year within a company
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| Cost constraint | Constraint of determining whether the cost that companies will incur to provide the information will out weigh the benefit that financial statement users will gain from having the information available
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| Current Assists | Cash and other resources that companies reasonably to convert to cash or use up within one year or the operating cycle, whichever is longer
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| Current liabilites | Obligations that a company reasonably expect to pay within the next year or operating cycle, whichever is longer
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| Current ratio | A measure used to evaluate a company's liquidity and short-term dept paying ability;computed as current assets divided by current liabilities
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| Debt to total assets ratio | Measures the percentage of total financing provided by creditors; computed as total dept divided by total assets
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| Earnings per share (EPS) | A measure of the net income earned on each share of common stock; computed as net income minus preferred stock dividends divided by the average number of common shares outstanding during the year
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| Economic entity assumption | An assumption that every economic entity can be separately identified and accounted for
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| Fair value principle | Assets and liabilities should be reported at fair value (the price received to sell an asset of sell a liability)
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| Faithful representation | Information that is complete, natural, and free from errors
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| Financial Accounting Standards Board (FASB) | The primary accounting standards standard-setting body in the United States
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| Free cash flow | Cash remaining from operating activities after adjusting for capital expenditures and dividends paid
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| Full disclosure principle | Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users
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| Generally accepted accounting principles (GAAP) | A set of rules and practices, having substantial authoritative support, that the the accounting profession recognizes as a general guide for financial reporting purposes
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| General concern assumption | The assumption that the company will continue in operation for the foreseeable future
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| Intangible asssets | Assets that do not have physical substance
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| International Accounting Standards Board (IASB) | An accounting standard-setting body that issues standards adopted by many countries outside of the United States
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| International Financial Reporting standards (IFRS) | Accounting standards, issued ny the the IASB, that have been adopted by many countries outside of the United States
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| Liquidity | The ability of a company to pay obligations that are expected to become due within the next year or operation cycle
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| Liquidity ratio | Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash
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| Long-term investmants | Generally, (1) investments in stock and bonds of other corporations that companies hold for more then one year, and (2) long-term assets, such as land and buildings, not currently being used in the companies operations
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| Materiality constraint | The constraint of determining whether an item is large enough to likely influence the decision of an investor or creditor
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| Monetary unit assumption | An assumption that requires that only those things that can be expresses in money are included in the accounting records
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| Operating Cycle | The average time required to go from cash to cash in producing revenue
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| Periodicity assumption | An assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business
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| Property, plant, and equipment | Assets with relatively long useful lives that companies use in operating the business
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| Public Company Accounting Oversight Board (PCAOB) | The group charged with determining auditing standards and reviewing them the performance of auditing firms
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| Ratio | An expression of the mathematical relationship between one quantity and another
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| Ratio analysis | A technology for evaluating financial statements that express the relationship among selected items of a financial statement data
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| Revelance | The quality of information that indicates the information makes a difference in decision
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| Securities and Exchange Commision | The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies
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| Solvency | The ability of a company to pay interest as it comes due and to repay the balance of debt at its maturity
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| Solvency ratios | Measures of the ability of the company to survive over a long period of time
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| Statement of stockholders' equity | A financial statement that presents the factors that caused stockholders' equity to change during the period, including those that caused retained earnings to change
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| Timely | Information that is available to decision makers before it loses its capacity to influence decisions
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| Understandability | Information presented in a clear and concise fashion so that users can interpret it and comprehend its meaning
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| Verifiable | Information that is proven to be free from error
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| Working capital | The difference between the amounts of current assets and current liabilities
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Created by:
NickUD
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