Definitions yo

Question 1

omission or mistreatment of information that could influence the decisions that financial statement users make about a specific reporting entity

Answer 1

materiality

Question 2

when the financial information actually depicts the underlying economic event

Answer 2

faithful representation

Question 3

world wide accounting standards

Answer 3

IFRS

international financial reporting standards

Question 4

makes sure reports are relevant to investors

Answer 4

GAAP

generally accepted accounting principles

Question 5

group of citizens who do not work for the government that makes GAAP

Answer 5

FASB

Financial accounting standards board

Question 6

provides accountability by issuing fees

Answer 6

SOX

Sarbans Oxley

Question 7

income

Answer 7

revenue

Question 8

the cost required for something

Answer 8

expence

Question 9

profit

Answer 9

net income

Question 10

profit over a period of time

Answer 10

income statement

Question 11

what is the income statement equation?

Answer 11

revenue-expenses=net income

Question 12

value at a point in time

Answer 12

balance sheet

Question 13

what is the balance sheet equation?

Answer 13

assets=liabilities+owner’s equity

Question 14

future economic benefits obtained or controlled by an entity as a result of past transactions

Answer 14

asset

Question 15

expected to convert to cash within one year

Answer 15

current asset

Question 16

probable future sacrifice of economic benefits arising from an entity’s present obligations to transfer assets or provide service to other entities in the future as a result of past transactions

Answer 16

liability

Question 17

debt that is expected to be satisfied within one year

Answer 17

current liability

Question 18

the residual interest on an entity’s assets that remains after deducting its liabilities

Answer 18

stockholders equity

Question 19

government body who has control over companies who sell stock

Answer 19

SEC

security exchange commission

Question 20

profit/# of shares

Answer 20

EPS

earnings per share

Question 21

presents each item as a percentage of total assets for one year

Answer 21

common sized balance sheet

Question 22

presents each item as a percentage of sales for one year

Answer 22

common sized income statement

Question 23

how easily an asset can be turned into cash

Answer 23

liquidity

Question 24

refers to the ability to generate cash, internally or externally, to satisfy plant capacity needs

Answer 24

solvency

Question 25

arises when one party to a business relationship can take actions for his or her own benefit that can harm other parties in the relationship

Answer 25

conflict of interest

Question 26

deals with the conflict of interest between shareholders and debt holders

Answer 26

debt covenant

Question 27

used when property rights in the asset have not been transferred to the lessee

Answer 27

operating lease

Question 28

give an example of an operating lease

Answer 28

short term rental

Question 29

used when property rights in the asset have been transferred to the lessee

Answer 29

capital lease

Question 30

stock that is bought back by the issuing company, reducing the amount of outstanding stock on the open market

Answer 30

treasury stock

Question 31

gives the holder the right, but not the obligation, to buy company stock at a stated price

Answer 31

stock option

Question 32

stocks who’s holder receive dividend payments first

Answer 32

preferred stock

Question 33

Give an example of a capital lease

Answer 33

when the lease spans most of the assets life