Exam 1 Flashcards
The information system that identifies, records, and communicates that economic events of an organizatino to interested users.
Accounting
The system of collecting and processing transaction data and communicating financial information to decision-makers.
Accounting information system.
Resources a business owns.
Assets
The examination of financial statements by a certified public accountant in order to express an opinion as to the fairness of presentation.
Auditing
A financial statement that reports the assets, liabilities, and owner’s equity at a specific date.
Balance sheet
Assets = Liabilities + Owner’s equity
Basic accounting equation
A part of the accounting process that involves only the recording of economic events.
Bookkeeping
A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock.
Corporation
The use of software and statistics to draw inferences from data.
Data analysis
Withdrawal of cash or other assets from an unincorporated business for the personal use of the owner(s).
Drawings
An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.
Economic entity assumption
The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair.
Ethics
Assets = Liabilities + Owner’s capital - Owner’s drawings + Revenues - Expenses
Expanded accounting equation
The cost of assets consumed or services used in the process of generating revenue.
Expenses
An accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell as asset or settle a liability).
Fair value principle
Numbers and descriptions match waht really existed or happened - they are factual.
Faithful representation
The field of accounting that provides economic and financial information for investors, creditors, and other external users.
Financial accounting
A private organization that establishes generally accepted accounting principles (GAAP) in the United States.
Financial Accounting Standards Board (FASB)
An area of accounting that uses accounting, auditing, and investigative skills to conduct investigations into theft and fraud.
Forensic accounting
Common standards that indicate how to report economic events.
Generally acdepted accounting principles (GAAP).
An accounting principle that states that companies should recordf assets at their cost.
Historical cost principle
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.
Income statement
An accounting standard-setting body that issues standards adopted by many countries outside of the United States.
International Accounting Standards Boarf (IASB)
International accounting standards set by the International Accounting Standards Board (IASB).
International Financial Reporting Standards (IFRS)
The assets an owner puts into the business.
Investments by owner
Creditor claims against total assets.
Liabilities
An area of public accounting ranging from development of accounting and computer systems to support services for marketing projects and merger and acquisition activities
Management consulting
The field of accounting that provides internal reports to help users make decisions about their companies.
Managerial accounting
An assumption stating that companies include in the accounting records only transaction data that can be expressed in terms of money.
Monetary unit assumption
The amount by which revenues exceed expenses.
Net income
The amount by which expenses exceed revenues.
Net loss
The ownership claim on total assets.
Owner’s equity
A financial statement that summarizes the changes in owner’s equipty for a specific period of time.
Owner’s equity statement
A business owned by two or more persons associated as partners
Partnership
A business owned by one person.
Proprietorship
An area of accounting in which the accountant offers expert service to the general public.
Public accounting
Financial information that is capable of making a difference in a decision.
Relevance
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.
Revenues
Law passed by Congress intended to reduce unethical corporate behavior.
Sarbanes-Oxley Act (SOX)
A governmental agency that oversees U.S. financial markets
Securities and Exchange Commission (SEC)
A financial statement that summaries information about the cash inflows (receipts) and outflows (payments) for a specific period of time.
Statement of cash flows
An area of public accounting involving tax advice, tax planning, preparing tax returns, and representing clients before governmental agencies.
Taxations
The economic events of a business that arr recorded by accountants.
Transactions
A record of increases and decreases in specific asset, liability, or owner’s equity items.
Account
A list of accounts and the account numbers that identify their location in the ledget.
Chart of Accounts
A journal entry that involves three or more accounts
Compound entry
The right side of an account.
Credit
The left side of an account.
Debit
A system that records in appropriate accounts the dual effect of each transaction.
Double-entry system
The most basic form of a journal.
General journal
A ledger that contains all asset, liability, and owner’s equity accounts.
General ledger
An accounting record in which transactions are initially recorded in chronological order.
Journal
The entering of transaction data in the journal.
Journalizing
The entire group of accounts maintained by a company.
Ledger
An account balance on the side where an increase in the account is recorded.
Normal balance
The procedure of transferring journal entries to the ledger accounts.
Posting
A journal entry that involves only two accounts.
Simple entry
The basic form of an account, consisting of (1) a title, (2) a left or debit side, and (3) a right or credit side.
T-account
A form with columns for debit, credit, and balance amounts in an account.
Three-column form of account
A list of accounts and their balances at a given time.
Trial balance.
Accounting basis, in which companies record transactions that change a company’s financial statements in the periods in which the events occur.
Accrual-basis accounting
Adjusting entries for either accrued revenues or accrued expenses.
Accruals
Expenses incurred but not yet paid in cash or recorded.
Accrued expenses
Revenues for services performed but not yet received in cash or recorded
Accrued revenues
A list of accounts and their balances after the company has made all adjustments.
Adjusted trial balance
Entries made at the end of an accounting period to ensure that companies follow the revenue recognition and expense recognition principles.
Adjusting entries
The difference between the cost of a depreciable asset and its related accumulated depreciation.
Book value
An accounting period that extends from January 1 to December 31.
Calendar year
Accounting basis in which companies record revenue when they receive cash and an expense when they pay out cash.
Cash-basis accounting
Ability to compare the accounting information of different companies because they use the same accounting principles.
Comparability
Use of the same accounting principles and methods from year to year within a company.
Consistency
An account offset against an asset account on the balance sheet.
Contra asset account
Constraint that weighs the cost that companies will incur to provide the information against the benefit that financial statement users will gain from having the information available.
Cost constraint
Adjusting entries for either prepaid expenses or unearned revenues.
Deferrals
The process of allocating the cost of an asset to expense over its useful life.
Depreciation
An assumption that every economic entity can be separately identified and accounted for.
Economic entity assumption
The principle that companies recognize expense int he period in which the companies make efforts (consume assets or incur liabilities) to generate revenue.
Expense recognition principle
An accounting principle that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability).
Fair value principle
Information that accurately depicts what really happened.
Faithful representation
An accounting period that is one year in length.
Fiscal year
An accounting principle that dictates that companies disclose circumstances and events that make a difference to financial sratement users.
Full disclosure principle
The assumption that th company will continue in operation for the foreseeable future.
Going concern assumption
An accounting prinfciple that statrs that companies should record assets at their cost.
Historical cost principle
Monthly or quarterly accounting time periods.
Interim periods
A company-specific aspect of relevance. An item is material when its size makes it likely to influence the decision of an investor or creditor.
Materiality
An assumption that requires that only those things that can be expressed in money are included in the accounting records.
Monetary unit assumption
Future expenses paid in cash before they are used or consumed.
Prepaid expenses (prepayments)
The quality of information that indicates the information makes a difference in a decision.
Relevance.
The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.
Revenue recognition principle
Describes information that is available to decision-makers before it loses its capacity to influence decisions.
Timely
An assumption that accountants can divide the economic life of a business into artificial time periods.
Time period assumption
Describes information that is presented in a clear and concise fashion so that users can interpret it and comprehend its meaning.
Understandability
A liability recorded for cash received before services are performed.
Unearned revenues.
The length of a service of a long-live asset.
Useful life
Describes information that occurs when inependent observers, using the same methods, obtain similar results.
Verifiable
