Chapter 1 - Intro To Corporate Accounting Flashcards
An accounting assumption that a business entity will continue to operate indefinitely
Going Concern Concept
Focuses on raising capital through borrowing or selling stock as well as the specific financial vehicles that will be used.
Capital Structure Management
The planning and managing of a corporation’s long-term investments, which can be tangible or intangible assets
Capital Budgeting
Encompass financial accounting, taxation, and financial reporting
Accounting Activities
Liquidity measure that is calculated by subtracting current liabilities from current assets. Used to determine a company’s ability to finance immediate operations (to buy inventory, finance growth, and obtain credit
Working Capital
A corporation’s mix of long-term debt and equity
Capital Structure
Focuses on what resources the corporation needs to meet its long-term goals and how these resources should be obtained
Capital Structure Decision Making
A common set of accounting standards and procedures used in the preparation of financial statements to ensure consistency of presentation and reported results (specific to a particular region or market)
Generally Accepted Accounting Principles (GAAP)
Requires an organization’s assets to be recorded at their purchase price or production price
Cost Principle
As a result of this principle, financial statements do not indicate how much a business is worth, nor do they indicate the values for which assets can be sold or replaced; they simply record the historical costs of the assets
Cost Principle
Requires revenues to be recognized and recorded at the time services are rendered or goods sold to customers
Revenue Recognition Principle
Requires expenses incurred in generating revenues to be matched against those revenues. As a result, the profitability of the organization’s activity can be accurately measured
Matching Principle
The accounting basis under which revenues and expenses are recorded as they are incurred
Accrual Based Accounting
Accounting basis under which revenues and expenses are recorded only when cash is received or paid
Cash Basis Accounting
Allows accountants to ignore generally accepted accounting principles when recording items that are not material if to do so is less expensive and more convenient
Materiality Principle
Requires an organization to use the same accounting principles and recording practices in every accounting period (but can have an exception if the alternative method will make the financial statements more informative for users)
Consistency Principle
Requires transactions to be recorded in a manner such that the assets and earnings are not overstated
Conservatism Principle
The two most globally recognized accounting standards
U.S. Generally Accepted Accounting Practices (GAAP) & International Financial Reporting Standards (IFRS)
The accounting principles and practices that are prescribed or permitted by an insurer’s domiciliary state (by U.S. insurance regulators) and that insurer’s must follow
Statutory Accounting Principles (SAP)
Recognized by the Securities and Exchange Commission (SEC) as the private-sector authority charged with establishing and maintaining the standards of financial accounting in the U.S.
Financial Accounting Standards Board (FASB)
The independent standard-setting body responsible for the development and publication of the IFRS.
International Accounting Standards Board (IASB)
What are the components of a complete set of financial statements?
Balance sheet, Income statement, Statement of Recognized Income and Expense (SORIE), Statement of cash flows, and accompanying notes to the financial statements
Reports assets and liabilities as if their value had not changed since the date of the acquisition
Historical Cost Accounting
The market value, either actual or estimated, of an asset or liability
Fair value
FASB’s & IASB’s commitment to convergence of their respective accounting standards in 2002.
Norwalk Agreement
Addresses an organization’s investing and financing decisions
Corporate Finance
An activity that provides financial information through various types of reports, including financial statements.
Accounting
The main goals of corporate finance and accounting are to…
Maximize shareholder wealth, provide for transparency in financial reporting, and to conduct financial operations in an ethical manner.
A federal statutory law governing corporate directors in the areas of investor protection, internal controls, and penalties (both civil and criminal)
Sarbanes-Oxley Act of 2002
