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Financial Accounting > Chapter 1: Accounting - The Language of Business > Flashcards

Chapter 1: Accounting - The Language of Business Flashcards

1
Q

Account

A

A summary record of the changes in a particular asset, liability, or owners’ equity (p. 11)

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2
Q

Account Payable

A

A liability that results from a purchase of goods or services on open account (p. 13)

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3
Q

Accounting

A

The process of identifying, recording, and summarizing economic information and reporting it to decision makers (p. 3)

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4
Q

Accounting System

A

The series of steps an organization uses to record financial data and convert them into informative financial statements (p. 6)

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5
Q

Additional Paid-In Capital

A

When issuing stock, the excess of the total amount the company receives for the stock over the par value of the shares (p. 20)

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6
Q

American Institute of Certified Public Accountants (AICPA)

A

The principal professional association of CPAs (p. 26)

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7
Q

Annual Report

A

A document prepared by management and distributed to current and potential investors to inform them about the company’s past performance and future prospects (p. 7)

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8
Q

Assets

A

Economic resources that a company expects to help generate future cash inflows or help reduce future cash outflows (p. 9)

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9
Q

Audit

A

An examination of a company’s transactions and the resulting financial statements (p. 25)

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10
Q

Auditor

A

A person or firm who examines the information used by managers to prepare the financial statements and attests to the credibility of those statements (p. 25)

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11
Q

Auditor’s Opinion

A

(Independent Opinion)
A report describing the scope and results of an audit. Companies include the opinion with the financial statements in their annual reports (p. 25)

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12
Q

Balance Sheet

A

Statement of Financial Position

A financial statement that shows the financial status of an organization at a particular instant in time (p. 9)

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13
Q

Balance Sheet Equation

A

Assets = Liabilities + Owners’ Equity (p. 9)

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14
Q

Board of Directors

A

A body elected by the shareholders to represent them. It is responsible for appointing and monitoring the managers, among other duties (p. 22)

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15
Q

Certified Public Accountant (CPA)

A

In the United States, a person earns this designation by meeting standards of both knowledge and integrity set by a State Board of Accountancy. Only CPAs can issue official opinions on financial statements in the United States (p. 25)

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16
Q

Chief Executive Officer (CEO)

A

The top manager in an organization (p. 22)

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17
Q

Closely Held

A

Privately owned.
A corporation owned by a family, a small group of shareholders, or a single individual, in which shares of ownership are not publicly sold (p. 18)

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18
Q

Common Stock

A

Par value of the stock purchased by common shareholders of a corporation (p. 20)

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19
Q

Common Stockholders

A

The owners who have a “residual” ownership in the corporation (p. 21)

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20
Q

Compound Entry

A

A transaction that affects more than two accounts (p. 13)

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21
Q

Corporation

A

A business organization that is created by individual state laws (p. 17)

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22
Q

Creditor

A

A person or entity to whom a company owes money (p. 14)

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23
Q

Entity

A

An organization or a section of an organization that stands apart from other organizations and individuals as a separate economic unit (p. 10)

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24
Q

FASB Financial Standards Codification

A

A compilation of all standards and other elements of U.S. GAAP into a single searchable database that is organized by topic to make it easy to research financial reporting issues (p. 23)

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25
Q

Financial Accounting

A

The field of accounting that serves external decision makers, such as stockholders, suppliers, banks, and government agencies (p. 7)

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26
Q

Financial Accounting Standards (U.S. GAAP)

A

The set of GAAP that applies to financial reporting in the United States (p. 23)

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27
Q

Financial Accounting Standards Board (FASB)

A

The independent private sector body that is responsible for establishing GAAP in the United States (p. 23)

28
Q

Form 10-K

A

A document that U.S. companies file annually with the Securities and Exchange Commission. It contains the companies’ financial statements (p. 7)

29
Q

Generally Accepted Accounting Principles (GAAP)

A

The term that applies to all the broad concepts and detailed practices to be followed in preparing and distributing financial statements.
It includes all the conventions, rules, and procedures that together comprise acceptable accounting practice (p. 23)

30
Q

Generally Accepted Auditing Standards (GAAS)

A

Standards issued by the Public Company Accounting Oversight Board that prescribe the minimum steps that an auditor must take in examining the transactions and financial statements and issuing an auditor’s opinion (p. 27)

31
Q

Governmental Accounting Standards Board (GASB)

A

The agency that regulates disclosures for governmental organizations in the United States (p. 31)

32
Q

Independent Opinion

A

See Auditor’s Opinion

33
Q

International Accounting Standards Board (IASB)

A

An international body established to develop, in the public interest, a set of high quality, understandable, and enforceable global accounting standards (p. 24)

34
Q

International Auditing and Assurance Standards Board (IAASB)

A

A body established by the International Federation of Accountants that is working to standardize audit regulation around the globe (p. 27)

35
Q

International Financial Reporting Standards (IFRS)

A

The set of GAAP that applies to companies reporting in more than 100 countries around the world (p. 23)

36
Q

Inventory

A

Goods held by a company for the purpose of sale to customers (p. 12)

37
Q

Liabilities

A

Economic obligations of the organization to outsiders, or claims against its assets by outsiders (p. 9)

38
Q

Limited Liability

A

A feature of the corporate form of organization whereby corporate creditors (banks/suppliers/etc.) ordinarily have claims against the corporate assets only, and not against the personal assets of the owners (p. 17)

39
Q

Long-Lived Asset

A

An asset that a company expects to use for more than 1 year (p. 11)

40
Q

Management Accounting

A

The field of accounting that serves internal decision makers, such as top executives, department heads, college deans, hospital administrators, and people at other management levels within an organization (p. 7)

41
Q

Net Assets

A

Assets less liabilities (p. 10)

42
Q

Notes Payable

A

Promissory notes that are evidence of a debt and state the terms of payment (p. 9)

43
Q

Open Account

A

Buying or selling on credit, usually by just an “authorized signature” of the buyer (p. 13)

44
Q

Owners’ Equity

A

The owners’ claims on an organization’s assets, or total assets less total liabilities (p. 9)

45
Q

Paid-In Capital

A

The total capital investment in a corporation by its owners, both at and subsequent to the inception of the business (p. 19)

46
Q

Paid-In Capital in Excess of Par Value

A

When issuing stock, the excess of the total amount the company receives of the stock over the par value of the shares (p. 20)

47
Q

Par Value

A

The nominal dollar amount printed on stock certificates (p. 20)

48
Q

Partnership

A

A form of organization that joins two or more individuals together as co-owners (p. 17)

49
Q

Private Accountants

A

Accountants who work for businesses, government agencies, and other nonprofit organizations (p. 25)

50
Q

Privately Owned

A

See Closely Held

51
Q

Public Accountants

A

Accountants who offer services to the general public on a fee basis (p. 25)

52
Q

Public Company Accounting Oversight Board (PCAOB)

A

An agency that regulates many aspects of public accounting and sets standards for audit procedures in the United States (p. 27)

53
Q

Publicly Traded Stock

A

Shares in the ownership of a company that are sold to the public (p. 7)

54
Q

Registered Public Accounting Firm

A

An accounting firm that registers with the PCAOB and therefore is allowed to audit companies with publicly traded stock in the United States (p. 27)

55
Q

Sarbanes-Oxley Act

A

The source of most government regulation of the accounting profession in the United States (p. 27)

56
Q

Securities and Exchange Commission (SEC)

A

The government agency responsible for regulating capital markets in the United States (p. 7)

57
Q

Shareholders’ Equity

A

Owners’ equity of a corporation. The excess of assets over liabilities of a corporation (p. 19)

58
Q

Sole Proprietorship

A

A business with a single owner (p. 17)

59
Q

Stated Value

A

See Par Value

60
Q

Statement of Financial Position

A

See Balance Sheet

61
Q

Stock Certificate

A

Formal evidence of ownership shares in a corporation (p. 18)

62
Q

Stockholders’ Equity

A

See Shareholders’ Equity

63
Q

Transaction

A

Any event that affects the financial position of an entity and that an accountant can reliably record in monetary terms (p. 10)

64
Q

Unlisted

A

See Closely Held/Privately Owned

65
Q

U.S. GAAP

A

See Financial Accounting Standards

Financial Accounting (4 decks)

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