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Fundamental Accounting > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Account payable

A

A liability created by buying goods or services on credit.

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2
Q

Accounting

A

An information system that identifies, measures, records, and communicates relevant information that faithfully represents an organization’s economic activities.

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3
Q

Accounting equation

A

A description of the relationship between a company’s assets, liabilities, and equity; expressed as Assets = Liabilities + Equity; also called the balance sheet equation.

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4
Q

Accounting Standards Board (AcSB)

A

Prior to Canada’s adoption of IFRS, the AcSB was the authoritative body that set accounting standards for Canada. With IFRS being set by the IASB, the AcSB’s new role is evolving.

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5
Q

Accounting Standards for Private Enterprises (ASPE)

A

Rules created by the Accounting Standards Board to govern accounting for Canadian private enterprises.

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6
Q

Accounts receivable

A

Assets created by selling products or services on credit.

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7
Q

AcSB

A

Prior to Canada’s adoption of IFRS, the AcSB was the authoritative body that set accounting standards for Canada. With IFRS being set by the IASB, the AcSB’s new role is evolving.

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8
Q

ASPE

A

Rules created by the Accounting Standards Board to govern accounting for Canadian private enterprises.

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9
Q

Assets

A

Properties or economic resources owned by the business; more precisely, resources with an ability to provide future benefits to the business, results from a past transaction.

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10
Q

Audit

A

An independent, external check of an organization’s accounting systems and records.

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11
Q

Balance sheet

A

A financial statement that reports the financial position of a business at a point in time; lists the types and dollar amounts of assets, liabilities, and equity as of a specific date; also called the statement of financial position.

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12
Q

Balance sheet equation

A

Another name for the accounting equation.

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13
Q

Bookkeeping

A

The part of accounting that involves recording economic transactions electronically or manually; also called recordkeeping.

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14
Q

Budgeting

A

The process of developing formal plans for future activities, which often serve as a basis for evaluating actual performance.

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15
Q

Business

A

One or more individuals selling products or services for profit.

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16
Q

Business activities

A

All of the transactions and events experienced by a business.

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17
Q

Business entity principle

A

The principle that requires every business to be accounted for separately from its owner or owners. It is based on the goal of providing relevant information about each business to users.

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18
Q

Business events

A

Activities that do not involve an exchange of economic consideration between two parties and therefore do not affect the accounting equation.

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19
Q

Business transaction

A

An exchange of economic consideration between two parties that causes a change in assets, liabilities, or equity. Examples of economic considerations include products, services, money, and rights to collect money.

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20
Q

CA

A

Chartered Accountant; an accountant who has met the examination, education, and experience requirements of the Institute of Chartered Accountants for an individual professionally competent in accounting.

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21
Q

Calendar year

A

An accounting year that begins on January 1 and ends on December 31.

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22
Q

Canada Revenue Agency (CRA)

A

The federal government agency responsible for the collection of tax and enforcement of tax laws.

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23
Q

CGA

A

Certified General Accountant; an accountant who has met the examination, education, and experience requirements of the Certified General Accountants’ Association for an individual professionally competent in accounting.

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24
Q

CMA

A

Certified Management Accountant; an accountant who has met the examination, education, and experience requirements of the Society of Management Accountants for an individual professionally competent in accounting.

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25
Q

Common shares

A

The name for a corporation’s shares when only one class of share capital is issued.

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26
Q

Comparability

A

Similarity; ability to be compared with other information.

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27
Q

Controller

A

The chief accounting officer of an organization.

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28
Q

Corporate governance

A

The mechanism by which individuals in a company, in particular the board of directors, are motivated to align their behaviours with the overall corporate good.

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29
Q

Corporation

A

A business that is a separate legal entity under provincial or federal laws with owners who are called shareholders.

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30
Q

Cost accounting

A

A managerial accounting activity designed to help managers identify, measure, and control operating costs.

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31
Q

Cost constraint

A

The accounting standard that requires the benefits obtained from financial statement information to be justifiable based on costs incurred in financial reporting.

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32
Q

Costs

A

The expenses incurred to earn revenues (or sales).

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33
Q

CPA

A

Chartered Professional Accountant, the newly formed accounting body with the mandate to merge the three legacy accounting designations (CA, CMA, CGA).

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34
Q

Creditors

A

Individuals or organizations entitled to receive payments from a company.

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35
Q

Currency

A

Transactions are to be expressed in money units based on the main currency used in operations; examples include units such as the Canadian dollar, American dollar, peso, and pound sterling.

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36
Q

Debtors

A

Individuals or organizations that owe amounts to a business.

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37
Q

Economic consideration

A

Something of value (e.g., products, services, money, and rights to collect money).

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38
Q

Equipment

A

Tangible asset intended to be used in the business with an expected life of more than one year.

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39
Q

Equity

A

The owner’s claim on the assets of a business; more precisely, the assets of an entity that remain after deducting its liabilities. Equity increases with owner investments and profit and decreases with owner withdrawals and losses, also called net assets.

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40
Q

Ethics

A

Beliefs that differentiate right from wrong.

41
Q

Events

A

Activities that do not involve an exchange of economic consideration between two parties and therefore do not affect the accounting equation.

42
Q

Expenses

A

Costs incurred or the using up of assets as a result of the major or central operations of a business.

43
Q

External auditors

A

Accountants outside the company who examine and provide assurance that financial statements are prepared according to generally accepted accounting principles (GAAP).

44
Q

External users

A

Persons using accounting information who are not directly involved in the running of the organization. Examples include shareholders, customers, regulators, and suppliers.

45
Q

Faithful representation

A

A quality of information that is complete, neutral, and free from error.

46
Q

Financial accounting

A

The area of accounting that reports on the financial performance and condition of an organization. It is aimed at serving external users.

47
Q

Financial statements

A

The products of accounting that report on the financial performance and condition of an organization. They include the income statement, statement of changes in equity, balance sheet, and statement of cash flows.

48
Q

Fiscal year

A

A one-year (12-month) reporting period.

49
Q

GAAP

A

The underlying concepts adopted by the accounting profession that make up acceptable accounting practices for the preparation of financial statements.

50
Q

General accounting

A

The task of recording transactions, processing data, and preparing reports for managers; includes preparing financial statements for disclosure to external users.

51
Q

Generally accepted accounting principles (GAAP)

A

The underlying concepts adopted by the accounting profession that make up acceptable accounting practices for the preparation of financial statements.

52
Q

Going concern assumption

A

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue.

53
Q

IASB

A

The body responsible for setting IFRS.

54
Q

IFRS

A

The standards for financial reporting that came into effect January 2011 in Canada for publicly accountable entities.

55
Q

Income

A

Another name for profit.

56
Q

Income statement

A

The financial statement that shows, by subtracting expenses from revenues, whether the business earned a profit; it lists the types and amounts of revenues earned and expenses incurred by a business over a period of time.

57
Q

Internal auditing

A

Function performed by employees within organizations who assess whether managers are following established operating procedures and evaluates the efficiency of operating procedures.

58
Q

Internal controls

A

Procedures set up to protect assets, ensure reliable accounting reports, promote efficiency, and encourage adherence to company policies.

59
Q

Internal users

A

Persons using accounting information who are directly involved in managing and operating an organization; examples include managers and officers.

60
Q

International Accounting Standards Board (IASB)

A

The body responsible for setting IFRS.

61
Q

International Financial Reporting Standards (IFRS)

A

The standards for financial reporting that came into effect January 2011 in Canada for publicly accountable entities.

62
Q

Liabilities

A

The debts or obligations of a business; claims by others that will reduce the future assets of a business or require future services or products, resulting from a past transaction.

63
Q

Limited liability

A

The owner’s liability is limited to the amount of investment in the business.

64
Q

Loss

A

The excess of expenses over revenues for a period.

65
Q

Management consulting

A

Activity in which suggestions are offered for improving a company’s procedures; the suggestions may concern new accounting and internal control systems, new computer systems, budgeting, and employee benefit plans.

66
Q

Managerial accounting

A

The area of accounting aimed at serving the decision-making needs of internal users.

67
Q

Natural business year

A

A 12-month period that ends when a company’s sales activities are at their lowest point.

68
Q

Net assets

A

Assets minus liabilities; another name for equity.

69
Q

Note payable

A

A liability expressed by a written promise to make a future payment at a specific time.

70
Q

Owner investments

A

The transfer of an owner’s personal assets to the business.

71
Q

Owner withdrawals

A

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

72
Q

Partnership

A

A business owned by two or more people that is not organized as a corporation.

73
Q

Private accountants

A

Accountants who work for a single employer other than the government or a public accounting firm.

74
Q

Private enterprise (PE)

A

A corporation that does not offer its shares for public sale.

75
Q

Profit

A

The excess of revenues over expenses for a period; also called income.

76
Q

Public accountants

A

Accountants licensed and regulated by their professional accounting bodies in the provinces in which they work. They provide professional services such as audit, tax, and consulting to many different clients.

77
Q

Public sale of shares

A

The issuance of shares by a corporation in an organized stock exchange.

78
Q

Publicly accountable enterprise (PAE)

A

A corporation that sells its shares to the public.

79
Q

Recordkeeping

A

The recording of financial transactions manually or electronically; also called bookkeeping.

80
Q

Relevance

A

Information must make a difference in the decision-making process.

81
Q

Revenue

A

The value of assets received or receivable as a result of selling goods or services to customers.

82
Q

Revenue recognition principle

A

Provides guidance on when revenue should be reflected on the income statement; the rule states that revenue is recorded at the time it is earned regardless of whether cash or another asset has been exchanged.

83
Q

Shareholders

A

The owners of a corporation; also known as stockholders.

84
Q

Shares

A

Units of ownership in a corporation; also known as stocks.

85
Q

Social responsibility

A

A commitment by an organization to consider the impact and being accountable for the effects that actions might have on society.

86
Q

Sole proprietorship

A

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

87
Q

Source documents

A

Original documents that identify and describe transactions within the organization. These documents provide information to be recorded in the accounting information system and can be in paper or electronic form. An example of a source document is an invoice used to record a sale of merchandise to a customer.

88
Q

Statement of cash flows

A

A financial statement that describes the sources and uses of cash for a reporting period, i.e., where a company’s cash came from (receipts) and where it went during the period (payments); the cash flows are arranged by an organization’s major activities: operating, investing, and financing activities.

89
Q

Statement of changes in equity

A

A financial statement that reports the changes in equity over the reporting period; beginning equity is adjusted for increases such as owner investment or profit and for decreases such as owner withdrawals or a loss.

90
Q

Statement of financial position

A

A financial statement that reports the financial position of a business at a point in time; lists the types and dollar amounts of assets, liabilities, and equity as of a specific date.

91
Q

Supplies

A

Consumable items that are purchased by the business to carry out its recurring activities. Examples include stationary, printer ink, flour used by a bakery, milk/coffee beans purchased by a café, nails purchased by a carpenter. Classified as a current asset. Consumed supplies become supplies expense.

92
Q

Taxation

A

The field of accounting that includes preparing tax returns and planning future transactions to minimize the amount of tax paid; involves private, public, and government accountants.

93
Q

Timeliness

A

A characteristic of accounting information that ensures it is available to decision makers in time to influence their decisions.

94
Q

Transaction

A

An exchange of economic consideration between two parties that causes a change in assets, liabilities, or equity. Examples of economic considerations include products, services, money, and rights to collect money.

95
Q

Understandability

A

A quality of information that is useful to users with reasonable knowledge of accounting and business and economic activities.

96
Q

Unlimited liability

A

When the debts of a sole proprietorship or partnership are greater than its resources, the owner(s) is (are) financially responsible.

97
Q

Verifiability

A

A quality of information that different knowledgeable users could agree was faithfully represented.

98
Q

Withdrawals

A

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

Fundamental Accounting (2 decks)

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