ch1 Flashcards
Creditor
Any person/business to whom a business owes money.
Certified Public ACcount
Licensed Professional accountants who serve the general public.
Financial Accounting Standards Board
Private organization that oversees the creation and governance of US accounting standards
Securities and Exchange Commission
US governmental agency that oversees the U.S. Financial markets.
Generally Accepted Accounting Principles
Accounting guidelines formulated by FASB US accounting rulebook.
Faithful Representation
Providing information that is complete, neutral and free from error.
Economic Entity Assumption
Organization that stands apart as a separate economic unit.
Sole Proprietorship Owners:
One
Sole Proprietorship Life:
Owner’s Choice/Death
Sole Prioprietorship Liability:
Owner is liable
Sole Proprietorship Taxation
Owner Pays Tax
Partnership Owners:
2 or More
Partnership Life:
Partner’s choice/death
Partnership Liability
Partners are liable
Partnership Taxation
Partners pay tax
Corporation Owners
One or More (Stockholders)
Corporation Liability
Stockholders are not liable
Corporation Taxation
Corporation pays tax.
LLC Owners
One or more (members/partners)
LLC Liability
Members are not liable
Corporation Life
Indefinite
LLC Life
Indefinite
LLC Taxation
Members pay tax
Structure of a Corporation
Stockholders -> Board of Directors -> Chairperson of the Board -> President -> Vice Presidents
Cost Principle
Acquired assets and services should be recorded at their actual cost.
Going Concern Assumption
Assumes entity will remain in operation for the forseeable future.
Monetary Unit Assumption
Requires the items on the financial statements to be measure in terms of a monetary u nit
International Financial Reporting Standards
Set of global accounting guidelines formulated by the IASB
International Accounting Standards Board
Private organization that oversees the creation and governance of the IFRS
Sarbanes-Oxley Act
Requires management to review internal control and take responsibility for the accuracy and completeness oftheir financial reports
Accounting Equation
Assets = Liability + Equity
Contributed Capital
Owner contributions to a corporation; Part of equity.
Common Stock
Basic element of contributed capital; represents basic ownership of a corporation
Retained Earnings
Equity earned by profitable operations of a corporation that is not distributed to stockholders.
Dividend
Distribution of a corporation’s earnings to stockholders
Expanded Accounting Equation
Assets = Liabilities + Contributed Capital + Retained Earnings
Corporation Ending Equity Equation
Beg Equity + Common Stock Issuance - Dividends + Net Income
Transaction
Affects the financial position of the business and can be measured with faithful representation.
Income Statement
Provides information about profitability for a particular period; Net Income = Revenue - Expenses
Statement of Retained Earnings
Informs how much of the earnings were kept and reinvested in the company; Beg RE + Net Income - Dividends
Balance Sheet
Economic Resouces company has and debt company owes. What is the financial position. Assets = Liabilities + Equity
Statement of Cash Flows
Business’ Cash Receipts and cash payments for a period; Cash Flows from Operating, Investing and Financing Activities
Return on Assets
Measures how profitability a company uses its assets. Net Income/Avg. Total Assets
