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27 Cards in this Set

  • Front
  • Back
information system that measures, processes, and communicates financial information about an identifiable economic entity.

Provides information for decision making.
economic unit that sells goods and services at prices that will provide an adequate return to its owners
earning enough income to attract and hold investment capital
keeping sufficient cash on hand to pay debts as they fall due
performance measures?
cash flow (for liquidity), net income or loss (for profitability), and ratio of expenses to revenue (for operating activities)
internal users
management accounting
generating and communicating accounting information in financial statements
financial accounting
mechanical and repetitive process of recording financial transactions and keeping financial records
protects investing public by regulating the issuing, buying, and selling of stocks in U.S.
securities and exchange commision
-What is measured?
-When should measurement be made?
-What value should be placed on the item being measured?
-How should what is measured be classified?
Basic Accounting Questions
economic events that affect a business's financial position
business transaction
purchase, sale, payment, collection, or loan
exchange of value
physical wear and tear on machinery, losses due to fire or theft
nonexchange of value
unincorporated business owned by one person
sole proprietorship
unincorporated business owned by two or more people
business unit chartered by the state and legally seperate from its owners (the stockholders)

- enables companies to amass large amounts of capital
- stockholders are at risk of loss only to the extent of the investment, and ownership can be transferred without affecting operations
distributions of earnings to stockholders
Assets = Liabilities + Stockholder's Equity
Accounting Equation
economic resource of a business that are expected to benefit future operations

ex. cash, accounts receivable, inventory, buildings, equipment, patents, copyrights
business's present obligations to pay cash, transfer assets, or provide services to other entities in future

ex. $ owed to bank, amounts owed to creditors for goods bought on credit, taxes owed to government
claims by owners of a corporation to the assets of a business
stockholder's equity
accumulation of profits and losses of a company since its inception, less total dividends declared
retained earnings
revenues & expenses

-measure business's success or failure in achieving profitability
income statement
changes in retained earnings in accounting period
statement of retained earnings
financial position of a business as of a certain date

-resources of business=assets
-debts of a business=liabilities
-owner's financial interest in business=stockholder's equity
balance sheet
discloses the cash flows that result from the business's operating, investing, and financial activities during the accounting period
statement of cash flows
conventions, rules, and procedures that constitute acceptable accounting practice at a given time.
GAAP generally accepted accounting principle