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Accounting > Terms To Memorize > Flashcards

Terms To Memorize Flashcards

1
Q

Recognition

A

Process of including an item on entity’s balance sheet or income statement

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2
Q

Derecognition

A

Process of removing something from the balance sheet or income statement

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3
Q

Economic Entity assumption

A

Separates the transaction carried out by the business from its owner

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4
Q

Legal entity

A

The relevant unit for an incorporated company

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5
Q

Accrual accounting

A

Records cash transactions and non cash transactions

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6
Q

Revenue recognition principle

A

Means that the companies revenues are recognized when the service or product is considered delivered to the customer - not when the cash is received.

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7
Q

Matching Principle

A

The expense should be reported in the same period in which the corresponding revenue is earned.

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8
Q

Depreciation

A

Allocation of an assets full purchase price to match cost to revenues over the entire estimated useful life instead of expensing full cost in the year purchase

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9
Q

Accumulated depreciation

A

Shows the total amount of depreciation taken to date

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10
Q

Measurement

A

All elements in financial statements must be measurable to be recognized

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11
Q

Periodicity Assumption

A

Economic activity of an entity can be divided into artificial time periods for reporting purposes (One month, one quarter, one year)

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12
Q

Monetary unit assumption

A

Assumption that money its self is treated as a unit of measurement

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13
Q

Going Concern Assumption

A

Assumption that a business enterprise will continue to operate in the foreseeable future

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14
Q

Historical cost principle

A

Requires that an asset be reported as its cash or cash equivalent cost at the time of purchase, including any additional expenses incurred to get the asset in place and prepared for use.

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15
Q

Fair Value Principle

A

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

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16
Q

Full disclosure principle

A

Anything that is relevant to user’s decisions should be included in statements

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17
Q

Order of assets to appear on a Canadian statement of financial position

A

Current assets, long term investments, property plant and equipment, intangible assets, goodwill

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18
Q

High price - earnings ratio

A

Indicates that investors believe that current profit levels will persist or increase

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19
Q

Current ratio calculation

A

Current assets / current liabilities

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20
Q

Debt to total assets calculation

A

Total liabilities / total assets

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21
Q

Basic earnings per share calculation

A

Income available to common shareholders/weighted average number of common shares

22
Q

Price earnings ratio

A

Market price per share/ companies earnings per share

23
Q

Accounting

A

Identifies and records the economic events of an organization and communicates its interests to users

24
Q

Internal users

A

People who work for the company
- managers
- financial directors

25
Q

External users

A
  • Investors
  • Creditors
  • Lenders
26
Q

Proprietorship

A
  • Owned by one person
  • Unlimited liability
  • Income included on owner’s own tax return
27
Q

Partnership

A
  • Owned by more than one person
  • Formalized in written agreement
28
Q

Corporation

A
  • Business organized as a separate legal entity
  • indefinite life
  • Public or Private
29
Q

Manufacturing business

A

Makes & sells products

30
Q

Merchandizing business

A

Sells goods to consumers

31
Q

Service business

A

Performs tasks for the benefit of consumers

32
Q

Financing activities

A

Obtaining funds to finance the operations of a business

33
Q

Investing activities

A

Obtaining the resources or assets needed to operate the business for the long term

34
Q

Operating activities

A

Main day to day activities of a business

35
Q

Net earnings/net profit calculation

A

Revenues + gains - expenses - losses

36
Q

Accounting equation

A

Assets = Liabilities + equity

37
Q

Private companies usually use…

A

ASPE

38
Q

Publicly traded corporations use…

A

IFRS

39
Q

Conceptual framework order:

A

1) Objectives of financial reporting (the why)
2) Qualitative characteristics of accounting information
3) Elements of financial statements
4) Foundational principles & conventions (the how)

40
Q

Compatibility

A

Information measured and reported in a similar way

41
Q

Verifiability

A

Can be verified

42
Q

Timeliness

A

The more current the information is the better

43
Q

Understandability

A

Provides enough info so it is clear

44
Q

Revenues

A

Increase in economic resources resulting from ordinary activities

45
Q

Expenses

A

Decrease in economic resources resulting from ordinary activities

46
Q

Gains

A

Increase in economic resources resulting from incidental activities

47
Q

Losses

A

Decrease in economic resources resulting from incidental activities

48
Q

Liquidity

A

Measure the short-term ability of the company to pay it maturing obligations and to meet unexpected needs for cash

49
Q

Debits

A

Assets, expenses, dividends

50
Q

Credits

A

Liabilities, shareholders equity, common shares, retained earnings, revenues

Accounting (5 decks)

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