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Accounting 101 > Chapter 1 > Flashcards

Chapter 1 Flashcards

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1
Q

Accounting

pg. 4

A

Information and measurement system that identifies, records, and communicates relevant information about a company’s business activities.

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2
Q

Accounting Equation

pg. 15

A

Equality involving a company’s assets, liabilities, and equity:
Assets = Liabilities + Equity
- also called balance sheet

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3
Q

Assets

pg. 15

A

Resources a business owns or controls that are expected to provide currents and future benefits to the business

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4
Q

Audit

pg. 13

A

Analysis and report of an organization’s accounting system, its records, and its reports using various tests.

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5
Q

Auditors

pg. 13

A

Individuals hired to review financial reports and information systems.

  • Internal Auditors of a company are employed to assess and evaluate its system of internal controls, including the resulting reports.
  • External Auditors are independent of a company and are hired to assess and evaluate the “fairness” of financial statements (or to perform other contracted financial services).
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6
Q

Balance Sheet

pg. 20

A

Financial statement that lists types and dollars amounts of assets, liabilities, and equity at a specific date.

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7
Q

Business Entity Assumption

pg. 12

A

Principle that requires a business to be accounted for separately from its owner(s) and from any other entity.

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8
Q

Common Stock

pg. 13

A

Corporation’s basic ownership share: also generically called capital stock.

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9
Q

Conceptual Framework

pg. 10

A

The basic concepts that underlie the preparation and presentation of financial statements for external users: can serve as a guide in developing future standards and to resolve accounting issues that are not addressed directly in current standards using the definitions, recognition criteria, and measurement concepts for assets, liabilities, and expenses.

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10
Q

Corporation

pg. 12

A

Business that is a separate legal entity under state or federal laws with owners called shareholders or stockholders.

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11
Q

Cost-benefit Constraint

pg. 13

A

The notion that the benefit of a disclosure exceeds the cost of that disclosure.

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12
Q

Cost-benefit Principle

pg. 11

A

Information system principle that prescribes the benefits form an activity in an accounting system to outweigh the costs of that activity.

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13
Q

Equity

pg. 15

A

Owner’s claim on the assets of a business; equals the residual interest in an entity’s assets after deducting liabilities; also called net assets.

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14
Q

Ethics

pg. 7

A

Codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest.

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15
Q

Events

pg. 16

A

Happenings that both affect an organization’s financial position and can be reliably measured.

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16
Q

Expanded Accounting Equation

pg. 15

A

Assets = Liabilities + Equity: Equity equals [Owner Capital - Owner Withdrawals + Revenues - Expenses] for a noncorporation; Equity equals [Contributed Capital + Retained Earnings + Revenues - Expenses] for a corporation where dividends are subtracted from retained earnings.

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17
Q

Expenses

pg. 15

A

Outflows or using up of assets as part of operations of a business to generate sales.

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18
Q

External Transactions

pg. 16

A

Exchanges of economic value between one entity and another entity.

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19
Q

External Users

pg. 5

A

Persons using accounting information who are not directly involved in running the organization.

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20
Q

Financial Accounting

pg. 5

A

Area of accounting aimed mainly at serving external users.

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21
Q

Financial Accounting Standards Board (FASB)

pg. 9

A

Independent group of full-time members responsible for setting accounting rules.

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22
Q

Full Disclosure Principle

pg. 11

A

Principle that prescribes financial statements (including notes) to report all relevant information about an entity’s operations and financial condition.

23
Q

Generally Accepted Accounting Principles (GAAP)

pg. 9

A

Rules that specify acceptable accounting practices.

24
Q

Going-Concern Assumption

pg. 12

A

Principle that prescribes financial statements to reflect the assumption that the business will continue operating.

25
Q

Income Statement

pg. 20

A

Financial statements that subtracts expenses from revenues to yield a net income or loss over a specified period of time; also includes any gains or losses.

26
Q

Internal Transaction

pg. 16

A

Activities within an organization that can affect the accounting equation.

27
Q

Internal Users

pg. 6

A

Persons using the accounting information who are directly involved in managing the organization.

28
Q

International Accounting Standards Board (IASB)

pg. 9

A

Group that identifies preferred accounting practices and encourages global acceptance; issues International Financial Reporting Standards (IFRS).

29
Q

International Financial Reporting Standards (IFRS)

pg. 9

A

Set of international accounting standards explaining how types of transactions and events are reported in financial statements; IFRS are issued by the International Accounting Standards Board.

30
Q

Liabilities

pg. 15

A

Creditors’ claims on an organization’s assets; involves a probable future payment of assets, products, or services that a company is obligated to make due to past transactions or events.

31
Q

Managerial Accounting

pg. 6

A

Area of accounting aimed mainly at serving the decision-making needs of internal users; also called management accounting.

32
Q

Matching (or Expense Recognition) Principle

pg. 11

A

Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses.

33
Q

Materiality Constraint

pg. 13

A

Prescribes that accounting for items that significantly impact financial statement and any interferences from them adhere strictly to GAAP.

34
Q

Measurement Principle

pg. 11

A

Principle that prescribes financial statement information, and its underlying transactions and events, be based on relevant measures of valuation; also called the cost principle.

35
Q

Monetary Unit Assumption

pg. 12

A

Principle that assumes transactions and events can be expressed in money units.

36
Q

Net Income

pg. 15

A

Amount earned after subtracting all expenses necessary for and matched with sales for a period; also called income, profit, or earnings.

37
Q

Net Loss

pg. 15

A

Excess of expenses over revenues for a period.

38
Q

Owner Investment

pg. 15

A

Assets put into the business by the owner.

39
Q

Owner, Withdrawals

pg. 15

A

Account used to record asset distributions to the owner.

40
Q

Partnership

pg. 12

A

Unincorporated association of two or more persons to pursue a business for profit as co-owners.

41
Q

Recordkeeping

pg. 4

A

Part of accounting that involves recording transactions and events, either manually or electronically; also called bookkeeping.

42
Q

Return

pg. 27

A

Monies received from an investment; often in percent form.

43
Q

Revenue Recognition Principle

pg. 11

A

The principle prescribing that revenue is recognized when earned.

44
Q

Revenues

pg. 15

A

Gross increase in equity from a company’s business activities that earn income; also called sales.

45
Q

Risk

pg. 27

A

Uncertainty about an expected return.

46
Q

Sarbanes-Oxley Act (SOX)

pg 13

A

Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws.

47
Q

Securities and Exchange Commission (SEC)

pg. 9

A

Federal agency Congress has charged to set reporting rules for organizations that sell ownership shares to the public.

48
Q

Shareholders

pg. 13

A

Owners of a corporation; also called stockholders.

49
Q

Shares

pg. 13

A

Equity of a corporation divided into ownership units; also called stock.

50
Q

Sole Proprietorship

pg. 12

A

Business owned by one person that is not organized as a corporation; also called proprietorship.

51
Q

Statement of Cash Flows

pg. 20

A

A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged by operating, investing, and financing.

52
Q

Statement of Owner’s Equity

pg. 20

A

Report of changes in equity over a period; adjusted for increases (owner investment and net income) and for decreases (withdrawals and net loss).

53
Q

Time Period Assumption

pg. 12

A

Assumption that an organization’s activities can be divided into specific time periods such as months, quarters, or years.

54
Q

Withdrawals

pg. 15

A

Payment of cash or other assets from a proprietorship or partnership to its owner or owners.

Accounting 101 (3 decks)

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