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54 Cards in this Set
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- Back
- 3rd side (hint)
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Accounting |
The process of identifying, measuring,and communicating the economic information that permits informed judgements and decisions |
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What are the assumptions that an accountants make? |
- economic entity - time period - monetary unit - going concern |
There are four units |
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Economic entity |
An assumption that business financial activities are separated from the companies owners |
Seperation |
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Time period |
The assumption that economic info can be meaningfully captured and communicated over a short period of time |
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Monetary unit |
Assumption that the dollar is most effective means to communicate economic activity |
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Going concern |
The assumption that the company will continue to operate in the foreseeable future |
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Revenue |
An increase in resources resulting from sale of goods and provisions |
INC |
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Revenue Recognition Principle |
a revenue should be recorded when a resource has been earned |
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Expense |
a decrease in resources resulting from the sale of goals services |
decrease |
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Matching Principal |
Expenses should be recorded in the period resources used to generate revenue |
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How do you find Net Income/Loss |
Revenue - Expense= Net income/loss |
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Asset |
An economic resource that is objectively measurable, that results from a transaction. |
will provide future economic benefit |
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Liability |
An obligation of a business that results from a past transaction |
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Equity |
The difference between a company's assets, and liability and are shares claimed by the company owners |
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Contributed Capital |
The resources that the owner contributes. |
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Retained Earnings |
Profits that a company generates |
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what should you remember about profits? |
Profits will be the Revenue - Expenses and all that from the income statements will they close out from your return earnings |
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Accounting Equations |
Assets = Liabilities + Equity |
Reported at a given time or date |
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Basic Structure of the statement of retained earnings |
Retained earnings, Beginning Balance +/- Net income/loss - dividends = Retaining earnings, Ending Balance |
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Example of the relationship of financial statements |
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what are the cash flows three different sections? |
-operative activities -investing activities -Financing activities |
The details of cash inflows and outflows for a business that are reported
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The basic structure of cashflows statement |
Cash Flows Provided (Used) by Operating Activities (Day to Day op) +/− Cash Flows Provided (Used) by Investing Activities (acquired assets) +/− Cash Flows Provided (Used) by Financing Activities (borrowed money) = Net Increase (Decrease) in Cash |
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Understandability |
The ability of accounting info to "be comprehensible to those who have a reasonable understanding of business ... and are willing to study info with reasonable diligence |
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Relevance |
The capacity of accounting info to make a difference in decisions |
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Reliability |
The extent to which accounting info can be depended upon to represent what it purports to represent, both in description and number. |
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Comparability |
The ability to use accounting info to compare or contrast the financial activities of different companies. |
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Consistency |
The ability to use accounting info to compare or contrast the financial activities of the same entity over time. |
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Materiality |
The threshold at which a financial item begins to affect decision making. |
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Conservation |
The manner in which accountants deal with uncertainty regarding economic situations. |
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Conceptual Framework of Accounting |
The collection of concepts that guide the manner in which accounting is practiced |
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What are the Three Business forms? |
-Sole proprietorship - Partnership - Corporation |
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Sole Proprietorship |
A business owned by one person |
an application of economic entity |
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Partnership |
A business that is formed when two or more proprietors join together to own a business |
Spreading the financial risk among many people |
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Corporation |
A separate legal entity that is established by filling articles of incorporation |
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Generally accepted accounting principles (GAAP) |
The accounting standards, rules and principles, and procedures that comprise authoritative practice for financial accounting. |
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What are the five GAAP most significant regulatory bodies? |
- Securities and Exchange Committee (SEC) - Financial Accounting Standards Board (FASB) -American Institute of Certified Public Accountants (AICPA) - International Accounting Standard Boards (IASB) -International Financial Reporting Standards (IFRS) |
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SEC |
The federal agency charged to protect investors and maintain the integrity securities markets |
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FASB |
The standard setting body whose mission is " to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issues, auditors, and users of financial information" |
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AICPA |
The professional organization of certified public accountants whose board establishes rules that are often more technical and more specific to certain industries |
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IASB |
A board, similar to the FASB, whose mission is to develop a single set of high-quality standards requiring transparent and comparable information. |
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IFRS |
Standars issued by the IASB |
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Classified balance sheet |
A type of balance sheet that groups together accounts of similar nature and reports them in a few major classifications |
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What five main categories are assets classified as? |
Current Assets
Long-term investments Fixed assets Intangible assets Other assets |
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Current Assets |
Any asset that is reasonably expected to be converted to cash or consumed within one year of the balance sheet date. |
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Long-term Investments |
The investments in the common stock or debt of another entity that will not be sold within a year |
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Fixed assets
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The tangible resources that are used in a company's operation for more than one year and are not intended for resale |
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intangible assets |
A resource that is used in operation for more than one a year, is not intended for resale and has no physical substance |
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Other Assets |
Resources that do not fit well into one of the other asset classification or are a small enough that they do not warrant separate reporting |
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Current Liability |
an obligation that is reasonably expected to be satisfied within one year |
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Long-term Liability |
An obligation that is not expected to be satisfied for one year |
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Single-step income statement |
Calculates total revenues and total expenses and then determines net income in one step by subtracting total expenses from total revenues |
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Multi-step income statement |
Calculates income by grouping certain revenues and expenses together and calculating several subtotals of income |
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Gross Profit |
The profit that a company generates when considering only the sales price and the cost of the product sold |
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Operating profit |
The profit that a company generates when considering both the cost of then inventory and the normal expenses incurred to operate the business |
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