Chapter 1 Vocabulary Flashcards
account form
The form of balance sheet that resembles the basic format of the accounting equation; with assets on the left side and Liabilities and Stockholder’s Equity sections on the right side.
accounting
An information system that provides reports to stakeholders about the economic activities and condition of a business.
balance sheet
A list of the assets; liabilities; and owner’s equity as of a specific date; usually at the close of the last day of a month or a year.
business
An organization in which basic resources (inputs); such as materials and labor; are assembled and processed to provide goods or services (outputs) to customers.
business entity concept
A concept 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.
Commission
The process of transferring temporary accounts balances to permanent accounts at the end of the accounting period.
common stock
The stock outstanding when a corporation has issued only one class of stock.
corporation
A business organized under state or federal statutes as a separate legal entity.
cost concept
A concept of accounting that determines the amount initially entered into the accounting records for purchases.
dividends
Distribution of a corporation’s earnings to stockholders.
earnings
The amount by which revenues exceed expenses.
equity
An integrated business and information system used by companies to plan and control both internal and supply chain operations.
ethics
Moral principles that guide the conduct of individuals.
expenses
Assets used up or services consumed in the process of generating revenues.
fees earned
Revenue from providing services.
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 Accounting Standards Board (FASB)
The authoritative body that has the primary responsibility for developing accounting principles.
financial statements
Financial reports that summarize the effects of events on a business.
generally accepted accounting principles (GAAP)
Generally accepted guidelines for the preparation of financial statements.
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.
income statement
A summary of the revenue and expenses for a specific period of time; such as a month or a year.
interest revenue
Money received for interest.
International Accounting Standards Board (IASB)
An organization that issues International Financial Reporting Standards for many countries outside the United States.
liabilities
The rights of creditors that represent debts of the business.
limited liability company (LLC)
A business form consisting of one or more persons or entities filing an operating agreement with a state to conduct business with limited liability to the owners; yet treated as a partnership for tax purposes.
management
method A method of valuing inventory that reports the inventory at the lower of its cost or current market value (replacement cost).
manufacturing business
A type of business that changes basic inputs into products that are sold to individual customers.
matching concept
The comprehensive budget plan linking all the individual budgets related to sales; cost of goods sold; operating expenses; projects; capital expenditures; and cash.
merchandising business
A type of business that purchases products from other businesses and sells them to customers.
net income
An approach to transfer pricing that allows managers of decentralized units to agree (negotiate) among themselves as to the transfer price.
net loss
The amount by which expenses exceed revenues.
objectivity concept
A concept of accounting that requires accounting records and the data reported in financial statements to be based on objective evidence.
owner’s equity
The owner’s right to the assets of the business.
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 firm or a not-for-profit organization.
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.
Public Company Accounting Oversight Board (PCAOB)
Public Company Accounting Oversight Board (PCAOB) A new oversight body for the accounting profession that was established by the Sarbanes- Oxley Act.
ratio of liabilities to stockholders’
A leverage ratio that measures the margin of safety of long-term creditors; calculated as the net fixed assets divided by the long-term liabilities.
rent revenue
Money received for rent.
retained earnings
Net income retained in a corporation.
retained earnings statement
A summary of the changes in the retained earnings in a corporation for a specific period of time; such as a month or a year.
revenues
Increases in assets from performing services or delivering products to customers.
sales
The total amount charged customers for merchandise sold; including cash sales and sales on account.
Sarbanes-Oxley Act
The relative distribution of sales among the various products available for sale.
Securities and Exchange
An act passed by Congress to restore public confidence and trust in the financial statements of companies.
service business
A business providing services rather than products to customers.
statement of cash flows
A summary of the cash receipts and cash payments for a specific period of time; such as a month or a year.
stockholders’ equity
The owners’ equity in a corporation.
unit of measure concept
A concept of accounting requiring that economic data be recorded in dollars.
