ch1 Flashcards
accounting
The information system that measures business activities processes that information into reports and financial statements and communicates the results to decision makers.
accounting equation
The most basic tool of accounting: Assets = Liabilities + Owners Equity.
asset
An economic resource that is expected to be of benefit in the future.
balance sheet
List of an entity’s assets liabilities and owners equity as of a specific date. Also called the statement of financial position.
board of directors
Group elected by the stockholders to set policy for a corporation and to appoint its officers.
capital
Another name for the owners equity of a business.
common stock
The most basic form of capital stock.
continuity assumption
See going-concern assumption.
corporation
A business owned by stockholders. A corporation is a legal entity an artificial person in the eyes of the law.
current asset
An asset that is expected to be converted to cash sold or consumed during the next 12 months or within the business’ normal operating cycle if longer than a year.
current liability
A debt due to be paid within one year or within the entity’s operating cycle if the cycle is longer than a year.
deficit
Negative balance in retained earnings caused by net losses over a period of years.
dividends
Distributions (usually cash) by a corporation to its stockholders.
entity
An organization or a section of an organization that for accounting purposes stands apart from other organizations and individuals as a separate economic unit.
ethics
Standards of right and wrong that transcend economic and legal boundaries. Ethical standards deal with the way we treat others and restrain our own actions because of the desires expectations or rights of others
expenses
Decrease in retained earnings that results from operations; the cost of doing business; opposite of revenues.
fair value
The amount that a business could sell an asset for or the amount that a business could pay to settle a liability.
financial accounting
The branch of accounting that provides information to people outside the firm.
financial statements
Business documents that report financial information about a business entity to decision makers.
historical cost principle
Principle that states that assets and services should be recorded at their actual cost
income statement
A financial statement listing an entity’s revenues-expenses- and net income or net loss for a specific period. Also called the statement of operations
International Financial Reporting Standards (IFRS)
Accounting guidelines- formulated by the International Accounting Standards Board (IASB). By 2015-U.S.GAAP is expected to be harmonized with IFRS. At that time-U.S. companies are expected to adopt these principles for their financial statements-so that they can be compared with those of companies from other countries
investing activities
Activities that increase or decrease the long-term assets available to the business; a section of the statement of cash flows
liability
An economic obligation (a debt) payable to an individual or an organization outside the business
limited liability company
A business organization in which the business (not the owner) is liable for the company’s debts
long-term debt
A liability that falls due beyond one year from the date of the financial statements
management accounting
The branch of accounting that generates information for the internal decision makers of a business- such as top executives
net earnings
Another name for net income
net income
Excess of total revenues over total expenses. Also called net earnings or net profit
net loss
Excess of total expenses over total revenues
net profit
Another name for net income
operating activities
Activities that create revenue or expense in the entity’s major line of business; a section of the statement of cash flows. Operating activities affect the income statement
owners’ equity
The claim of the owners of a business to the assets of the business Also called capital- stockholders’ equity- or net assets
paid-in capital
The amount of stockholders’ equity that stockholders have contributed to the corporation. Also called contributed capital
partnership
An association of two or more persons who co-own a business for profit
proprietorship
A business with a single owner
retained earnings
The amount of stockholders’ equity that the corporation has earned through profitable operation and has not given back to stockholders
revenues
Increase in retained earnings from delivering goods or services to customers or clients
shareholder
Another name for stockholder
stable-monetary-unit assumption
The reason for ignoring the effect of inflation in the accounting records- based on the assumption that the dollar’s purchasing power is relatively stable
statement of cash flows
Reports cash receipts and cash payments classified according to the entity’s major activities: operating- investing- and financing
statement of financial position
Another name for the balance sheet
statement of operations
Another name for the income statement
statement of retained earnings
Summary of the changes in the retained earnings of a corporation during a specific period
stock
Shares into which the owners’ equity of a corporation is divided
stockholder
A person who owns stock in a corporation. Also called a shareholder
stockholders’ equity
The stockholders’ ownership interest in the assets of a corporation.
