Acct 203 - Chpt 1

Front 1

Accounts

Back 1

Record of classified and summarized transaction data; component of financial statement elements.

Front 2

Accounting

Back 2

Service-based profession developed to provide reliable and relevant financial information useful in making decisions.

Front 3

Accounting Equation

Back 3

Algebraic relationship between a company's assets and the claims on those assets, represented as Assets = Liabilities + Equity.

Front 4

Accounting Event

Back 4

Economic occurrence that changes a company's assets, liabilities, or equity.

Front 5

Accounting Period

Back 5

Time span covered by the financial statements; normally one year, but may be a quarter, a month or some other time interval.

Front 6

annual report

Back 6

Document companies publish to provide information, including financial statement, to stockholders

Front 7

articulation

Back 7

Characteristic of financial statements that means they are interrelated. For example, the amount of net income reported on the income statement is added to beginning retained earnings balance reported on the statement of changes in stockholder's

Front 8

assets

Back 8

Economic resource used to produce revenue which is expected to provide future benefit to the business.

Front 9

asset exchange transaction

Back 9

A transaction, such as the purchase of land with cash, that decreases one asset and increases another asset; total assets remain unchaged.

Front 10

asset source transaction

Back 10

A transaction that increases both an asset and a claim on assets; the three types of asset source transactions are acquisitions from owners (equity), borrowings from creditors (liabilities), or earnings from operations (revenues)

Front 11

asset use transaction

Back 11

A transaction that decreases both an asset and a claim on assets; the three types of asset use transactions are (transfers to owners), liability payments (to creditors), or expenses (costs incurred to operate the business)

Front 12

balance sheet

Back 12

Financial statement that reports a company's assets and the corresponding claims (liabilities and equity) on those assets as of a specific date (usually as of the end of the accounting period)

Front 13

claims

Back 13

owner's and creditor's interests in a business's assets

Front 14

common stock

Back 14

Basic class of corporate stock taht has no preferential claim on assets or dividends; certificates that evidence ownership in a company.

Front 15

creditors

Back 15

individual or organization that has loaned goods or services to a business

Front 16

dividend

Back 16

transfer of wealth from a business to its owners

Front 17

double-entry bookkeeping

Back 17

recordkeeping system that provides checks and balances by recording two sides for every transaction

Front 18

earnings

Back 18

the difference between revenues and expenses "profit"

Front 19

elements

Back 19

the primary financial statement categories: assets, liabilities, equity, contributed capital, revenue, expenses, gains, losses, distributions, and net income

Front 20

equity

Back 20

owner's interest in company assets; secondary to creditors' claims (i.e. Assets Liabilities Equity); also called residual interest or net assets

Front 21

expenses

Back 21

an economic sacrifice (decrease in assets or increase in liabilities) that is incurred in the process of generating revenue.

Front 22

financial accounting

Back 22

Branch of accounting focused on the business information needs of external users (creditors, investors, governmental agencies, financial analysts, etc) its objective is to classify and record business events and transactions to produce external financial reports (income statement, balance sheet, statement of cash flows, and statement of changes in equity)

Front 23

Financial accounting Standards Board (FASB)

Back 23

Private, independent standard-setting body established by the accounting profession that has been delegated the authority by the SEC to establish most of the accounting rules and regulations for public financial reporting

Front 24

financial resources

Back 24

money or credit supplied to a business by investors (owners) and creditors

Front 25

financial statements

Back 25

Reports used to communicate a company's financial information to interested external parties. The four general-purpose financial statements are the income statement, statement of changes in equity, balance sheet, and statement of cash flow

Front 26

financing activities

Back 26

cash inflows and outflows from transactions with investors and creditors (except interest), including cash receipts from issuing stock, borrowing activities, and cash disbursements to pay dividents; one of the three categories of cash inflows and outflows reported on the statement of cash flows. This category shows the amount of cash supplied by these resource providers and the amount of cash that is returned to them

Front 27

general ledger

Back 27

the set of all accounts used in given accounting system, typically organized in financial statement order

Front 28

generally accepted accounting principles (GAAP)

Back 28

rules and practices that accounts agree to follow in financial reports prepared for public distribution

Front 29

historical cost concept

Back 29

accounting practice of reporting assets at the actual price paid for them when purchased regardless of estimated changes in market value

Front 30

horizontal statements model

Back 30

Concurrent representation of several financial statements horizontally across a page

Front 31

income

Back 31

increase in value created by providing goods and services through resource transformation

Front 32

income statement

Back 32

financial reports of profitability; measure the difference between revenues and expenses for the accounting period (whether or not cash has been exchanged)

Front 33

interest

Back 33

free paid for the use of funds; represents expense to the borrower and revenue to the lender

Front 34

investing activities

Back 34

cash inflows and outflows associated with buying or selling long-term assets and cash inflows and outflows associated with lending activities and investments in the debt and equity of other companies; one of the three categories of cash inflows and outflows reported on the statement of cash flows

Front 35

investors

Back 35

company or individual who gives assets or services in exchange for security certificates representing ownership interest

Front 36

labor resources

Back 36

both intellectual and physical efforts of individuals used in the process of providing goods and services to customers

Front 37

liabilities

Back 37

Obligations of a business to relinquish assets, provide services, or accept other obligations. p. 11

Front 38

liquidation

Back 38

Process of dividing up an organization's assets and returning them to the resource providers. In business liquidations, creditors normally have first priority; after creditor claims have been satisfied, any remaining assets are distributed to the company's owners (investors). p. 4

Front 39

liquidity

Back 39

Ability to convert assets to cash quickly and meet short term obligations. pp. 19, 359

Front 40

managerial accounting

Back 40

Branch of accounting focused on the information needs of managers and others working within the business; its objective is to gather and report information that adds value to the business. Managerial accounting information is not regulated or reported to the public. p. 6

Front 41

manufacturing businesses

Back 41

Companies that make the goods they sell customers. p. 22

Front 42

market

Back 42

Group of people or entities organized to buy and sell resources. p. 4

Front 43

merchandising businesses

Back 43

Companies that buy and resell merchandise inventory. p. 22

Front 44

net income

Back 44

Increase in equity resulting from operating the business. p. 17

Front 45

net loss

Back 45

Decrease in equity resulting from operating the business. p. 17

Front 46

not-for-profit entities

Back 46

Organizations (also called nonprofit or nonbusiness entities) established primarily for motives other than making a profit, such as providing goods and services for the social good. Examples include state-supported universities and colleges, hospitals, public libraries, and public charities. p. 6

Front 47

operating activities

Back 47

Cash inflows from and outflows for routine, everyday business operations, normally resulting from revenue and expense transactions including interest; one of the three categories of cash inflows and outflows reported on the statement of cash flows. pp. 20, 606

Front 48

permanent accounts

Back 48

Balance sheet accounts; contain information carried forward from one accounting period to the next (ending account balance one period becomes beginning account balance next period). p. 21

Front 49

physical resources

Back 49

Natural resources businesses transform create more valuable resources. p. 5

Front 50

price-earnings ratio

Back 50

Measure that reflects the values of different stocks in terms of earnings; calculated as market price per share divided by earnings (net income) per share; a higher P/E ratio generally indicates that investors are optimistic about a company's future. p. 25

Front 51

productive assets

Back 51

Assets used by a business, normally over multiple accounting periods, to generate revenue; contrast with assets that are sold (inventory) or held (investments) to generate revenue; also called productive assets. p. 443

Front 52

profit

Back 52

Value added by transforming resources into products or services desired by customers. p. 4

Front 53

reliability concept

Back 53

The accounting principle that supports reporting most assets at historical cost, because historical cost , unlike the market value of many assets, can be independently verified. Reliable information is not subjective. p. 15

Front 54

reporting entities

Back 54

Businesses or other organizations for which financial statements are prepared. p. 9

Front 55

retained earnings

Back 55

Portion of stockholders' equity that includes all earnings retained in the business since inception (revenues minus expenses and distributions for all accounting periods). p. 11

Front 56

revenue

Back 56

The economic benefit (increase in assets or decrease in liabilities) gained by providing goods or services to customers. pp. 14, 82

Front 57

Service Businesses

Back 57

Organizations such as accounting and legal firms, dry cleaners, and insurance companies that provide services to consumers. p. 22

Front 58

stakeholders

Back 58

Parties interested in the operations of a business, including owners, lenders, employees, suppliers, customers, and government agencies. p. 6

Front 59

statement of cashflows

Back 59

The financial statement that reports a company's cash inflows and outflows for an accounting period, classifying them as operating, investing, or financing activities. p. 20

Front 60

statement of changes in stockholders' equity

Back 60

Statement that summarizes the transactions that affected the owners' equity during the accounting period. p. 19

Front 61

temporary accounts

Back 61

Accounts used to collect retained earnings data applicable to only the current accounting period (revenues, expenses and distributions); sometimes called nominal accounts. p. 21

Front 62

transaction

Back 62

Business event that involves transferring something of value between two entities. p. 12

Front 63

users

Back 63

Individuals or organizations that use financial information for decision making. p. 6