ACG 2021 1-3 Flashcards
Accounting
A system of maintaining records of a company’s operations and communicating that information to decision makers
Financial Accounting
Measurement of business activities of a company and communication of those measurements to external parties for decision-making purposes
Corporation
An entity that is legally separate from its owners
Partnership
A business owned by two or more persons
Sole proprietorship
A business owned by one person
Assets
Resources of a company
Liabilities
Amounts owed to creditors
Stockholders’ equity, Stockholders’, or owners’
claims to resources, which equal the difference between total assets and total liabilities
Accounting Equation
The equation that shows a company’s resources (assets) equal creditors’ and owners’ claims to those resources (liabilities and stockholders’
Expenses
Costs of providing products and services
Revenues
Amounts recorded when the company sells products or services to customers
Net Income
Difference between revenues and expenses
Dividends
Distributions by a corporation to its stockholders
Financial Statements
Periodic reports published by the company for the purpose of providing information to external users
Income Statement
A financial statement that reports the company’s revenues and expenses over an interval of time
Statement of stockholders’ equity
A financial statement that summarizes the changes in stockholders’ equity over an interval of time
Balance sheet
A financial statement that presents the financial position of the company on a particular date
Statement of cash flows
A financial statement that measures activities involving cash receipts and cash payments over a period of time
Generally accepted accounting principles (GAAP)
The rules of financial accounting
Financial Accounting Standards Board (FASB)
AN independent, private body that has primary responsibility for the establishment of GAAP in the United States
International Accounting Standards Board (IASB)
The body primarily responsible for creating a single set of global accounting standards
International Financial Reporting Standards (IFRS)
The accounting rules set by the International Accounting Standards Committee (IASC) and currently set by the International Accounting Standards Board (IASB)
Auditors
Trained individuals hired by a company as an independent party to express a professional opinion of the conformity of that company’s financial statements with GAAP
Sarbanes-Oxley Act
Known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly referred to as SOX; the act established a variety of guidelines related to auditor-client relations and internal control procedures
Accounting Cycle
Full set of procedures used to accomplish the measurement/communication process of financial accounting.
External Transactions
Transactions the firm conducts with a separate economic entity
Internal Transactions
Events that affect the financial position of the company but do not include an exchange with a separate economic entity.
Account
A summary of the effects of all transactions related to a particular item over a period of time
Chart of accounts
A list of all account names used to record transactions of a company
Revenue Recognition Principle
Record revenue in the period in which we provide goods and services to customers
Debit
The LEft side of an account. Indicates an increase in asset, expense, or dividend accounts, and a decrease to liability, stockholders’ equity, or revenue accounts.
Credit
The right side of an account. Indicates a decrease to an asset, expense, or dividend accounts, and an increase to liability, stockholders’ equity, or revenue accounts
Journal
A chronological record of all transactions affecting a firm
Journal Entry
The format used for recording business transactions
Posting
The process of transferring the debt and credit information from the journal to individual accounts in the general ledger
General Ledger
A single location that provides a list of transactions affecting each account and the account’s balance
T - Account
A simplified form of a general ledger account with space at the top for the account title, one side for recording debits, and one side for recording credits
Trial balance
A list of all accounts and their balances at a particular date, showing that total debits equal total credits
Accrual-Basis Accounting
Record revenues when goods and services are provided to customers, and record expenses with related revenues
Matching Principle
Recognize expenses in the same period as the revenues they help to generate
Cash-basis Accounting
record revenues at the time cash are received and an expense at the time cash is paid
Adjusting Entries
Entries used to record events that occur during the period but that have not yet been recorded by the end of the period
Prepaid Expenses
The costs of assets acquired in one period that will be expensed in a future period
Depreciation
The process of allocating the cost of a long-term asset to expense over its useful life
Contra Account
An account with a balance that is opposite, or “contra,” to that of its related accounts
Deferred Revenues
When a company receives cash in advance from a customer for products or services to be provided in the future.
Accrued Expense
When a company has incurred an expense but hasn’t yet paid cash or recorded an obligation to pay
Adjusted Trial Balance
A list of all accounts and their balances after we have updated account balances for adjusting entries.
Classified Balance sheet
A balance sheet that groups a company’s assets into current assets and long-term assets and that separates liabilities into current liabilities and long-term liabilities.
Temporary Accounts
All revenue, expense, and dividend accounts; account balances are maintained for a single period and then closed (or zeroed out) and transferred to the balance of the retained earnings account at the end of the period
Permanent Accounts
All accounts that appear in the balance sheet; account balances are carried forward from period to period
Closing Entries
Entries that transfer the balances of all temporary accounts (revenues, expenses, and dividends) to the balance of the Retained Earnings account
Post-closing trial balance
A list of all accounts and their balances at a particular date after we have updated account balances for closing entries.
