Accounting Chapter 1, Pt. 1

Front 1

Accounting

Back 1

An information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities.

Front 2

Accounting equation

Back 2

The relation of assets, liabilities, and equity; Assets = Liabilities + Equity

Front 3

Assets

Back 3

Resources a company owns or controls, expected to yield future benefits.

Front 4

Audit

Back 4

Examination of whether financial statements are prepared using GAAP. It does not attest to absolute accuracy of statements.

Front 5

Auditors

Back 5

Examine financial statements to verify that they are prepared according to GAAP; must also verify the effectiveness of internal controls.

Front 6

Balance sheet

Back 6

Financial statement that describes a company's financial position at a point in time; shows types and amounts of assets, liabilities, and equity.

Front 7

Bookkeeping

Back 7

Also recordkeeping; the recording of transactions and events, either manually or electronically; 2nd step of accounting (1st is identifying, 3rd is communicating)

Front 8

Common stock

Back 8

Also capital stock; ownership units of a corporation; part of contributed capital, reflects inflows of resources such as cash and other net assets from stockholders in exchange for stock.

Front 9

Conceptual framework

Back 9

Guides standard-setting of accounting principles; consists of objectives, qualitative characteristics, elements, and recognition and measurement; FASB and IASB attempting to converge and enhance.

Front 10

Contributed capital

Back 10

Refers to amount that stockholders invest in a company; part of the equity portion of accounting equation.

Front 11

Corporation

Back 11

A business legally separate from its owner or owners; it is responsible for its own acts and debts.

Front 12

Cost-benefit constraint

Back 12

Constraint on financial reporting that prescribes that only information with benefits of disclosure greater than the costs of providing it need be disclosed.

Front 13

Dividends

Back 13

The outflow of resources such as cash and other assets to stockholders; reduces equity.

Front 14

Dodd-Frank Wall Street Reform and Consumer Protection Act

Back 14

1. Promote accountability and transparency in the financial system; 2. Put an end to the notion of "too big to fail"; 3. Protect the taxpayer by ending bailouts; 4. Protect consumers from abusive financial services.

Front 15

Equity

Back 15

The owner's claim on assets; is equal to assets minus liabilities; also called net assets or residual equity; consists of contributed capital plus retained earnings.

Front 16

Ethics

Back 16

Beliefs that distinguish right from wrong; accepted standards of good and bad behavior.

Front 17

Events

Back 17

Refer to happenings that affect the accounting equation and are reliably measured.

Front 18

Expanded accounting equation

Back 18

Accounting equation with equity broken into its parts; Assets = Liabilities + Common Stock - Dividends + Revenues - Expenses

Front 19

Expenses

Back 19

Decreases equity from costs of providing products and services to customers; one component of net income.

Front 20

External transactions

Back 20

Exchanges of value between two entities, which yield changes in the accounting equation.