Chapter One Flashcards
Accounting
Is the “language of business”. And used to communicate financial info to users through reports.
GAAP
US Generally accepted accounting principles
Acct Standards: rules
Acct Principles: framework
FASB
Financial Accounting Standards Board.
Develops accounting standards in the US and maintains an electronic database called the Accounting Standards Codification
SEC
Securities and Exchange Commission.
Has authority over accounting and financial disclosures for companies whose stock shares are traded publicly.
IASB
International Accounting Standards Board.
Most countries use these accounting standards.
More “principles-based”
They set IFRS international Financial Reporting Standards
AICPA
American institute of certified public accountants
Data Analytics
Analyzing raw data to find patterns, anomalies, and insight.
Relevant
Info w potential to impact decisions
2 characteristics
Financial Reports
RELEVANT/ impact on decisions
FAITHFUL Representation / accurately reflecting entity’s condition
.
4 Characteristics
of
Relevant & Faithful Representation
Comparability -accurate
Verifiability - 3ed party
Timeliness - distributed info
Understandably - clear
Accurately reflects entity’s economic activity or condition.
Measurement Principle
OBJECTIVE & VERIFIABLE
based upon unbiased evidence & 3ed party confirmation
Historical Cost
or
Cost Principle
Recorded an item at its initial transaction price.
Revenue Recognition Principle
Revenue recorded when earned.
When services or goods are delivers to customer.
Expense Recognition
Or
Matching Principle
Recorded in same period as it is incurred.
Expenses
Cash used to generate revenue.
Arm’s Length Transaction
Transaction between two INDEPENDENT parties.
4 Principals of Financial Accounting
Measurement Principle
Historical Cost
Revenue Recognition
Expense Recognition
Assets
resources owned by a business