Chapter 1 Terms Flashcards
Accounting
The information system that identifies, records, and communicates the economic events of an organization to interested users
Accounting Information System
The system of collecting and processing transaction data and communicating financial information to decision makers
Assets
Resources a business owns
Auditing
The examination of financial statements by a certified public accountant in order to express an opinion as to the fairness of presentation
Balance Sheet
A financial statement that reports the assets, liabilities, and owner’s equity at a specific date
Basic Accounting Equation
Assets = Liabilities + Owners Equity
Bookkeeping
A part of the accounting process that involves only the recording of economic events
Corporation
A business organized as a separate legal entity under state corporation law, having ownership divided into transferrable shares of stock
Data Analytics
The use of software and statistics to draw inferences from data
Drawings
Withdrawal of cash or other assets from an unincorporated business for the personal use of the owner(s)
Economic Entity Assumption
An assumption that requires that the activities of the entity be kept separate and distinct from the activities of the owner and all other economic entities
Ethics
The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair
Expanded Accounting Equation
Assets = Liabilities + Owner’s Capital - Owner’s Drawings + Revenue - Expenses
Expenses
The cost of assets consumed or services used in the process of generating revenue
Fair Value Principle
An accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability)
Faithful Representation
Numbers and descriptions match what really existed or happened - they are factual
Financial Accounting
The field of accounting the provides economic and financial information for investors, creditors, and other external users
Forensic Accounting
An area of accounting that uses accounting, auditing, and investigative skills to conduct investigations into theft and fraud
Financial Accounting Standards Board (FASB)
A private organization that establishes generally accepted accounting principles (GAAP) in the United States
Generally Accepted Accounting Principles (GAAP)
Common standards the indicate how to report economic events
Historical Cost Principle
An accounting principle that states that companies should record assets at their cost
Income Statement
A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time
International Accounting Standards Board (IASB)
An accounting standard-setting body that issues standards adopted by many countries outside the United States
International Financial Reporting Standards (IFRS)
International accounting standards set by the IASB
Investments By Owner
The assets an owner puts into the business
Liabilities
Creditor claims against total assets
Management Consulting
An area of public accounting ranging from development. of accounting and computer systems to support the services for marketing projects and merger and acquisition activities
Managerial Accounting
The field of accounting that provides internal reports to help users make decisions about their companies
Monetary Unit Assumption
An assumption stating that companies include in the accounting records only transaction data that can be expressed in terms of money
Net Income
The amount by which revenues exceed expenses
Net Loss
The amount by which expenses exceed revenues
Owner’s Equity
The ownership claim on total assets
Owner’s Equity Statement
A financial statement that summarizes the changes in owner’s equity for a specific period of time
Partnership
A business owned by two or more persons associated as partners
Propietorship
A business owned by one person
Public Accounting
An area of accounting in which the accountant offers expert service to the general public
Relevance
Financial information that is capable of making a difference in a decision
Revenues
The increases in assets or decreases in liabilities resulting from the sale of goods or the performance of services in the normal course of business
Sarbarnes-Oxley Act (SOX)
Law passed by congress intended to reduce unethical corporate behavior
Securities and Exchange Commission (SEC)
A governmental agency that oversees U.S. financial markets and accounting standard-setting bodies
Statement of Cash Flows
A financial statement that summarizes information about the cash inflows (receipts) and cash outflows (payments) for a specific period of time
Taxation
An area of public accounting involving tax advice, tax planning, preparing tax returns, and representing clients before governmental agencies
Transactions
The economic events of a business that are recorded by accountants
