Acctg. Chapter 1

Front 1

Accounting consists of three basic activities

Back 1

identifies, records, and com-municates the economic events of an organization to interested users.

Front 2

usually involves only the recording of economic events

Back 2

Bookkeeping

Front 3

of accounting information are managers who plan, organize, and run the business.

Back 3

Internal users

Front 4

Internal users include

Back 4

These include marketing managers, production supervisors, fi nance directors, and company offi cers

Front 5

provides internal reports to help users make decisions about their companies.

Back 5

Managerial accounting

Front 6

are individuals and organizations outside a company who want fi nancial information about the company.

Back 6

External users

Front 7

The two most common types of external users are

Back 7

Investors

Creditors

Front 8

answers externalmusers' questions. It provides economic and fi nancial information for investors, creditors, and other ____. The information needs of external users vary considerably.

Back 8

Financial accounting

Front 9

A private organization that establishes generally accepted accounting principles (GAAP). (p. 9).

Back 9

Financial Accounting Standards Board (FASB)

Front 10

) Common standards that indicate how to report economic events. (p. 9).

Back 10

Generally accepted accounting principles (GAAP

Front 11

fi nancial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specifi c period of time. (p. 21).

Back 11

Income statement

Front 12

An accounting standard-setting body that issues standards adopted by many countries outside of the United States.

Back 12

International Accounting Standards Board (IASB)

Front 13

The assets an owner puts into the business. (p. 13).Liabilities Creditor claims on total assets. (

Back 13

Investments by owner

Front 14

The fi eld of accounting that pro-vides internal reports to help users make decisions about their companies. (p.

Back 14

Managerial accounting

Front 15

An assumption stating that companies include in the accounting records only transac-tion data that can be expressed in terms of money. (p.

Back 15

Monetary unit assumption

Front 16

The amount by which revenues exceed ex-penses. (p.

Back 16

Net income

Front 17

The amount by which expenses exceed revenues. (p.

Back 17

Net loss

Front 18

The ownership claim on total assets. (

Back 18

Owner’s equity

Front 19

A financial statement that summarizes the changes in owner’s equity for a specific period of time.

Back 19

Owner’s equity statement

Front 20

A business owned by two or more persons associated as partners. (p.

Back 20

Partnership

Front 21

A business owned by one person.

Back 21

Proprietorship

Front 22

Financial information that is capable of making a difference in a decision. (p. 9).

Back 22

Relevance

Front 23

The gross increase in owner’s equity resulting from business activities entered into for the purpose of earning income. (

Back 23

Revenues

Front 24

Law passed by Congress in 2002 intended to reduce unethical corporate behavior. (

Back 24

Sarbanes-Oxley Act of 2002 (SOX

Front 25

A gov-ernmental agency that oversees U.S. fi nancial markets and accounting standard-setting bodies.

Back 25

Securities and Exchange Commission (SEC

Front 26

A fi nancial statement that summarizes information about the cash infl ows (receipts) and cash outfl ows (payments) for a specifi c period of time.

Back 26

Statement of cash fl ows

Front 27

The economic events of a business that are recorded by accountants. (p. 14).

Back 27

Transactions

Front 28

The information system that identifi es, records, and communicates the economic events of an organization to interested users. (

Back 28

Accounting

Front 29

p. 4). Resources a business owns. (

Back 29

Assets

Front 30

p. 12).A fi nancial statement that reports the assets, liabilities, and owner’s equity at a specifi c date.

Back 30

Balance sheet

Front 31

(p. 12). A part of accounting that involves only the recording of economic events. (

Back 31

Bookkeeping

Front 32

p. 5). The process of reducing the differences be-tween GAAP and IFRS. (

Back 32

Convergence

Front 33

p. 9). A business organized as a separate legal en-tity under state corporation law, having ownership divided into transferable shares of stock. (

Back 33

Corporation

Front 34

p. 11). An accounting principle that states that companies should record assets at their cost. (

Back 34

Cost principle

Front 35

p. 9). Withdrawal of cash or other assets from an un-incorporated business for the personal use of the owner(s).

Back 35

Drawings

Front 36

An assumption that re-quires that the activities of the entity be kept separate and distinct from the activities of its owner and all other eco-nomic entities.

Back 36

(p. 13).Economic entity assumption

Front 37

The standards of conduct by which one’s actions are judged as right or wrong, honest or dishonest, fair or not fair. (

Back 37

Ethics

Front 38

(p. 14). The cost of assets consumed or services used in the process of earning revenue.

Back 38

Expenses

Front 39

(p. 14). An accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability). (

Back 39

Fair value principle

Front 40

Numbers and descriptions match what really existed or happened—it is factual. (p. 9).

Back 40

Faithful representation