Chapter 1 Vocab Flashcards
What is an Account?
A record of the business activities related to a particular item.
What is Accounting?
A system of maintaining records of a company’s operations and communicating that information to decision makers.
What is the Accounting Equation?
Equation that shows a company’s resources (assets) equal creditors’ and owners’ claims to those resources (liabilities and stockholders’ equity).
What are Assets?
Resources of a company.
Who are Auditors?
Trained individuals hired by a company as an independent party to express a professional opinion of the conformity of that company’s financial statements with GAAP.
What is a Balance Sheet?
A financial statement that presents the financial position of the company on a particular date.
What is Common Stock?
Amounts invested by stockholders when they purchase shares of stock; external source of equity.
What is Comparability?
The ability of users to see similarities and differences between two different business activities.
What is Consistency?
The use of similar accounting procedures either over time for the same company or across companies at the same point in time.
What is a Corporation?
An entity that is legally separate from its owners.
What is Cost Constraint?
Financial accounting information is provided only when the benefits of doing so exceed the costs.
Who are Creditors?
Lend money to a company, expecting to be paid back the loan amount plus interest.
What is Decision Usefulness?
The ability of the information to be useful in decision making.
What are Dividends?
Distributions to stockholders, typically in the form of cash.
What is the Economic Entity Assumption?
All economic events with a particular economic entity can be identified.
What is Ethics?
A code or moral system that provides criteria for evaluating right and wrong behavior.
What are Expenses?
Costs of providing products and services and other business activities during the current period.
What is Faithful Representation?
Accounting information that is complete, neutral, and free from error.
What is Financial Accounting?
Measurement of business activities of a company and communication of those measurements to external parties for decision purposes.
What is the Financial Accounting Standards Board (FASB)?
An independent, private body that has primary responsibility for the establishment of GAAP in the United States.
What are Financial Statements?
Periodic reports published by the company for the purpose of providing information to external users.
What are Generally Accepted Accounting Principles (GAAP)?
The rules of financial accounting.
What is the Going Concern Assumption?
In the absence of information to the contrary, a business entity will continue to operate indefinitely.
What is an Income Statement?
A financial statement that reports a company’s revenues and expenses and resulting net income or net loss for a specific period of time.
What is the International Accounting Standards Board (IASB)?
An international accounting standard-setting body responsible for the convergence of accounting standards worldwide.
What are International Financing Reporting Standards (IFRS)?
The standards being developed and promoted by the International Accounting Standards Board.
What are Liabilities?
Amounts owed to creditors.
What is the Monetary Unit Assumption?
A unit or scale of measurement can be used to measure financial statement elements.
What is Net Income?
Difference between revenues and expenses.
What is a Partnership?
Business owned by two or more persons.
What is the Periodicity Assumption?
The economic life of an enterprise can be divided into artificial time periods for financial reporting.
What is Relevance?
Accounting information that possesses confirmatory value and/or predictive value, and that is material.
What are Retained Earnings?
All net income minus all dividends over the life of the company; internal source of equity.
What are Revenues?
The amounts recognized when the company sells products or provides services to customers.
What is a Sole Proprietorship?
A business owned by one person.
What is a Statement of Cash Flows?
A financial statement that measures activities involving cash receipts and cash payments over an interval of time.
What is a Statement of Stockholder’s Equity?
A financial statement that summarizes the changes in stockholders’ equity over an interval of time.
What is Stockholders Equity?
Owners’ claims to resources.
What primarily gives rise to Stockholders Equity?
Contributions by the owners and company operation.
How is Stockholders Equity calculated?
Total assets minus total liabilities.
What is Timeliness?
Information being available to users early enough to allow them to use it in the decision process.
What is Understandability?
Users understand the information in the context of the decision being made.
What is Verifiability?
A consensus among different measurers.
