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40 Cards in this Set

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GAAP
• GAAP: “Generally accepted accounting principles” the rules the specify acceptable acc practices
• Business Entity:
• Business Entity: Every business is accounted for separately from its owner or owners.
• Cost principle
• Cost: Information is based on actual costs incurred in transactions
• Going Concern
• Going Concern: Financial statements reflect the assumption that the business continues operating
• Monetary Unit
• Monetary Unit: we can express transactions and events in monetary units.
• Matching
• Matching: A company records the expenses incurred to generate the revenue reported.
• Full disclosure
• Full disclosure: A company reports details behind financial statements that would impact users' decisions
• Revenue recognition.
• Revenue recognition: Revenue is recorded only when the earnings process is complete.
• General Acc:
• General Acc: Derived from long-used and generally accepted accounting practices
• Specific Acc
• Specific Acc: Usually created by a pronouncement from an authoritative body
• Objectivity
• Objectivity: The accounting guideline prescribing that financial statement information be supported by independent, unbiased evidence other than someone's belief or opinion
accounting equation
Assets = Liability + Equity
External Transactions.
External Transactions: Occur b/w 2 different entities and are easy to record because there are always source documents evidencing the transaction.
Internal Transactions
Internal Transactions: occurs within a single entity and are more difficult to record because source documents may not always be present
Income statement
Income statement: Revenues- expenses = net income
Statement of Retained Earnings
Statement of Retained Earnings: retained earnings from year before + net income – dividends= retained earnings this year.
Balance Sheet:
Balance Sheet:
• Add up all assets (cash, supplies, equipt).
• Add up all liabilities(accounts payable)
• Add up all equity( common stock, retained earnings)
Statement of Cashflows:
Statement of Cashflows: debits and credits of cash.
Return on assets
Return on assets: ROA= net income/average total assets
• Average total assets is this years+last years/2
Account
Account: A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense
Corporation
Corporation: Is a legal entity separate and distinct from its owners
Expenses
Expenses: Decreases in retained earnings that represent costs of assets or services used to earn revenues
Permanent accounts
Permanent accounts: Assets, liabilities, and equity accounts are not closed; these accounts
Contra account
Contra account: An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account
oppurtunities in acc
financial, managerial, taxation,
accounting
the language of business
2 most common firls of acc in practice
managerial and financial
IASB
international acc standards board
hopes to create more harmony among acc practices of different countries
sole proprietorship
a business owned by one person. has unlimited liability. no income tax for the business
partnership
business owned by 2 or more people. this is NOT legally separate from its owners.
ledger
record containing all accounts used by a company
prepaid accoutns
assets
debt ratio
total liabilities/total assets
prepaid expenses
DEFERRED- items paid for in advance of receiving their benefits
accrued expenses
costs that are incurred in a period but are both unpaid and unrecorded
unearned revenues
liabilties-cash received in advance of providing products and services
accrued revenues
revs earned in a period that are both unrecorded and not yet received in cash or other assets
income summary
a temporary account(only used for the closing process) that contains a credit for the sum of all revenues (and gains) and a debit for the sum of all expenses and loses.

its balance equals net income/loss and is transferred to retained earnings
profit margin
net income/net sales
current ratio
current assets/current liabilties