Chapter 1: Introduction Flashcards
account form (balance sheet)
The form of balance sheet that resembles the basic format of the accounting equation, with Assets on the left side and Liabilities and Owner’s Equity sections on the right side.
account payable
The liability created by a purchase on account.
account receivable
A claim against the customer created by selling merchandise or services on account.
accounting
An information system that provides reports to users about the economic activities and condition of a business.
accounting equation
Assets = Liabilities + Owner’s Equity
Accounting Standards Board (AcSB)
The authoritative body of the CICA that has the primary responsibility for approving and developing accounting standards in Canada.
Accounting Standards for Private Enterprise (ASPE)
The guidelines that constitute Part II of the CICA Handbook, which private enterprises may choose to use for the preparation of financial information.
asset
An economic resource controlled by an entity as a result of a past transaction and from which future eco-nomic benefit may be obtained.
balance sheet
A list of the assets, liabilities, and owner’s equity as at a specific date, usually at the close of the last day of a month or a year. Also known as statement of financial position under IFRS.
benefit vs cost constraint
The trade-off that exists between the accuracy of financial information and the cost to produce that information. Also known as cost constraint.
business
An organization in which basic resources (inputs), such as materials and labour, are assembled and processed to provide goods or services (outputs) to customers.
business entity assumption
An assumption of accounting that limits the economic data in the accounting system to data related directly to the activities of the business.
business transaction
An economic event or condition that directly changes an entity’s financial condition or directly affects its results of operations.
Canadian generally accepted accounting principles (Canadian GAAP)
All of the Canadian accounting standards, including Accounting Standards for Private Enterprises (ASPF) and International Financial Reporting Standards (IFRS).
Canadian Institute of Chartered Accountants (CICA)
A private organization that has primary responsibility for approving and developing accounting standards in Canada.
cash flow statement
A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year. Also known as Statement of cash flows under IFRS.
Certified General Accountant (CGA)
An individual who has passed the professional examinations and practical experience requirements of the Certified General Accountants Association of Canada (CGA-Canada).
Certified Management Accountant (CMA)
An individual who has passed the professional examinations and practical experience requirements of the Society of Management Accountants of Canada (CMA-Canada).
Chartered Accountant (CA)
An individual who has passed the professional examinations and practical experience requirements of the Canadian Institute of Chartered Accountants (CICA).
Chartered Professional Accountant (CPA)
An individual who has passed the Chartered Professional Accountants’ professional examinations and practical experience requirements.
CICA Handbook
A document containing accounting standards and guidance for Canadian organizations, published by the Canadian Institute of Chartered Accountants.
comparability
A preferred characteristic of accounting information whereby information for one company is comparable to information prepared for another organization.
corporation
A business organized under provincial, territorial, or federal charter as a separate legal entity.
cost constraint
The trade-off that exists between the accuracy of financial information and the cost to produce that information. Also known as benefit versus cost constraint.
cost principle
In financial statements, the recognition of transactions at the amount of cash paid or received. Also known as the historical cost basis.
ethics
Moral principles that guide the conduct of individuals.
expenses
Assets used up or services consumed in the process of generating revenues.
faithful representation
Recording an event in a manner that reflects the substance of the transaction. Also known as representational faithfulness.
fees earned
Revenue from providing services.
fees earned on account
Revenue from providing services when payment is received at a later date.
financial accounting
The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records.
financial statements
Financial reports that summarize the effects of events on a business.
general-purpose financial statements
A type of financial accounting report that is distributed to external users. The term “general purpose” refers to the wide range of decision-making needs that the reports are designed to serve.
going concern assumption
An assumption that the business will continue for the foreseeable future.
historical cost basis
In financial statements, the recognition of transactions at the amount of cash paid or received. Also known as the cost principle.
income statement
A summary of the revenues and expenses for a specific period of time, such as a month or a year. (p. 16) Also known as statement of comprehensive income under IFRS.
interest revenue
Money received for interest.
International Accounting Standards Board (IASB)
An organization that issues International Financial Reporting Standards for many countries.
International Financial Reporting Standards (IFRS)
Guidelines, contained in Part I of the CICA Handbook for the preparation of financial statements for publicly accountable enterprises.
liability
An obligation to give up either services or assets.
management (or managerial) acccounting
The branch of accounting that provides accounting information for internal users’ decision making.
manufacturing business
A business that changes basic inputs into products that are sold to customers.
materiality
Information is considered material if omitting it or misstating it could influence decisions that users make on the basis of financial information of an entity.
merchandising business
A business that purchases products from other businesses and sells them to customers.
net income
The amount by which revenues exceed expenses.
net loss
The amount by which expenses exceed revenues.
owner’s equity
Assets less liabilities, being the amount that the owner is entitled to.
partnership
An unincorporated business form consisting of two or more persons conducting business as co-owners for profit.
prepaid expenses
Items such as supplies that will be used in the business in the future.
private accounting
The field of accounting whereby accountants are employed by a business or a not-for-profit organization.
private enterprises
Profit-oriented organizations that do not issue shares or bonds through stock exchanges.
profit
The difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services.
proprietorship
A business owned by one individual.
public accounting
The field of accounting where accountants and their staff provide services on a fee basis.
publicly accountable enterprises
Companies with shares or bonds listed on stock exchanges and other organizations, such as credit unions or investment dealers, that impact large or diverse groups of stakeholders.
purchase on account
Items purchased lier in the by agreeing to pay the supp near future.
relevance
Ability of financial information to be helpful to investors and others making financial decisions.
rent revenue
Money received for rent.
report form (balance sheet)
The form of balance sheet that presents the liabilities and owner’s equity sections below the assets section.
representational faithfulness
Recording an event in a manner that reflects the substance of the transaction. Also known as faithful representation.
revenue recognition principle
Revenue transactions that meet the recognition criteria, normally recognized when goods are provided or services are performed.
revenues
Increases in owner’s equity as a result of selling services or products to customers.
sales
The total amount charged customers for merchandise sold, including cash sales and sales on account.
sales on account
The amount charged customers for merchandise sold when payment is received at a later date.
service business
A business providing services rather than products to customers.
statement of cash flows
For companies reporting under IFRS, a summary of the cash receipts and cash payments for a specific period of time, such as a month or a year. Also known as cash flow statement.
