Acg2001 Ch1.

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ACCOUNTING

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INFORMATION AND MEASUREMENT SYSTEM THAT IDENTIFIES, RECORDS, AND COMMUNICATES RELEVANT INFO. ABOUT A COMPANY'S BUSINESS ACTIVITIES.

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ACCOUNTING EQUATION

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ASSETS = LIABILITIES + EQUITY

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ASSETS

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RESOURCES A BUSINESS OWNS OR CONTROLS THAT ARE EXPECTED TO PROVIDE CURRENT AND FUTURE BENEFITS TO THE BUSINESS.

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AUDIT

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ANALYSIS AND REPORT OF AN ORGANIZATION'S ACCOUNTING SYSTEM, ITS RECORDS, AND ITS REPORTS USING VARIOUS TESTS.

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AUDITORS

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INDIVIDUALS HIRED TO REVEIW FINANCIAL REPORTS AND INFORMATIONS SYSTEMS. Internal Auditors of a company are employed to assess and evaluate its system of internal controls. External Auditors are hired to evaluate the "fairness" of financial statements.

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BALANCE SHEET

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FINANCIAL STATEMENT THAT LISTS TYPES AND DOLLAR AMOUNTS OF ASSETS , LIABILITIES AND EQUITY AT A SPECIFIC DATE.

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BUSINESS ENTITY ASSUMPTION

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PRINCIPLE THAT REQUIRES A BUSINESS TO BE ACCOUNTED FOR SEPARATELY FROM ITS OWNERS AND FROM ANY OTHER ENTITY.

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COMMON STOCK

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CORPORATION'S BASIC OWNERSHIP SHARE; ALSO GENERICALLY CALLED CAPITAL STOCK.

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CONCEPTUAL FRAMEWORK

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A WRITTEN FRAMEWORK TO GUIDE THE DEVELOPMENT PREPARATION, AND INTERPRETATION OF FINANCIAL ACCOUNTING INFO.

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CORPORATION

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BUSINESS THAT IS SEPARATE LEGAL ENTITY UNDER STATE OR FEDERAL LAWS WITH OWNERS CALLED SHAREHOLDERS OR STOCKHOLDERS.

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COST PRINCIPLE

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PRESCRIBES FINANCIAL STATEMENT INFO. TO BE BASED ON ACTUAL COSTS INCURRED IN BUSINESS TRANSACTIONS.

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COST-BENEFIT CONSTRAINT

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NOTION THAT ONLY INFO. WITH BENEFITS OF DISCLOSURE GREATER THAN THE COST OF DISCLOSURE NEED TO BE DISCLOSED.

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EQUITY

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OWNER'S CLAIM ON THE ASSETS OF A BUSINESS; EQUALS THE RESIDUAL INTEREST IN AN EQUITY'S ASSETS AFTER DOING DEDUCTING LIABILITIES ALSO CALLED NET SETS

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EVENTS

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HAPPENINGS THAT BOTH AFFECT AN ORGANIZATION'S FINANCIAL POSITION AND CAN BE RELIABLY MEASURED.

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EXPANDED ACCOUNTING EQUATION

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ASSETS = LIABILITIES + EQUITY - OWNER WITHDRAWALS + REVENUES - EXPENSES

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EXPENSES

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OUTFLOWS OR USING UP OF ASSETS AS PART OF A BUSINESS TO GENERATE SALES.

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EXTERNAL TRANSACTIONS

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EXCHANGES OF ECONOMIC VALUE BETWEEN ONE ENTITY AND ANOTHER ENTITY.

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EXTERNAL USERS

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PERSONS USING ACCOUNTING INFORMATION WHO ARE NOT DIRECTLY INVOLVED IN RUNNING THE ORGANIZATION.

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FINANCIAL ACCOUNTING

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AREA OF ACCOUNTING AIMED MAINLY AT SERVING EXTERNAL USERS

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FINANCIAL ACCOUNTING BOARD (FASB)

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INDEPENDENT GROUP OF FULL TIME MEMBERS RESPONSIBLE FOR SETTING ACCOUNTING RULES.

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FULL DISCLOSURE PRINCIPLE

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PRINCIPLE THAT PRESCRIBES FINANCIAL STATEMENTS (INCLUDING NOTES) TO REPORT ALL RELEVANT INFORMATION ABOUT AN ENTITY'S OPERATIONS AND FINANCIAL CONDITION.

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GOING-CONCERN ASSUMPTION

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PRINCIPLE THAT PRESCRIBES FINANCIAL STATEMENTS TO REFLECT THE ASSUMPTION THAT THE BUSINESS WILL CONTINUE OPERATING.

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INCOME STATEMENT

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FINANCIAL STATEMENT THAT SUBTRACTS EXPENSES FROM REVENUES TO YEILD A NET INCOME OR LOSS OVER A SPECIFIED PERIOD OF TIME; ALSO INCLUDES ANY GAINS OR LOSSES

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INTERNAL TRANSACTION

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ACTIVITIES WITHIN THE ORGANIZATION THAT CAN AFFECT THE ACCOUNTING EQUATION

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INTERNAL USERS

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PERSONS USING ACCOUNTING INFORMATION WHO ARE DIRECTLY INVOLVED IN MANAGING THE ORGANIZATION.

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INTERNAL FINANCIAL REPORTING STANDARDS (IFRS)

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IFRS ARE REQUIRED OR ALLOWED BY OVER 100 COUNTRIES; IFRS IS SET BY INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) WHICH AIMS TO DEVELOP A SINGLE SET OF GLOBAL STANDARDS, TO PROMOTE THOSE STANDARDS AND TO CONVERGE NATIONAL AND INTERNATIONAL STANDARDS GLOBALLY.

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LIABILITIES

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CREDITORS CLAIMS ON AN ORGANIZATION'S ASSETS; INVOLVES A PROBABLE FUTURE PAYMENT OF ASSETS, PRODUCTS , OR SERVICES THAT A COMPANY IS OBLIGATED TO MAKE DUE TO PAST TRANSACTIONS OR EVENTS.

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MANAGERIAL ACCOUNTING

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AREA OF ACCOUNTING AIMED MAINLY AT SERVING THE DECISION-MAKING NEEDS OF INTERNAL USERS; ALSO CALLED MANAGEMENT ACCOUNTING.

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MATCHING PRINCIPLE ( OR EXPENSE RECOGNITION)

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PRESCRIBE EXPENSES TO BE REPORTED IN THE SAME PERIOD AS THE REVENUES THAT WERE EARNED AS A RESULT OF THE EXPENSES

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MATERIALITY CONSTRAINT

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PRESCRIBES THAT ACCOUNTING FOR ITEMS THAT SIGNIFICANTLY IMPACT FINANCIAL STATEMENT AND ANY INFERENCES FROM THEM ADHERE STRICTLY TO GAAP

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MEASUREMENT PRINCIPLE

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ACCOUNTING INFORMATION IS BASED ON COST WITH POTENTIAL LATER ADJUSTMENT TO FAIR VALUE

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MONETARY UNIT CONSUMPTION

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PRINCIPLE THAT ASSUMES TRANSACTION AND EVENTS CAN BE EXPRESSED IN MONEY UNITS

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NET INCOME

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AMOUNT EARNED AFTER SUBTRACTING ALL EXPENSES NECESSARY FOR AND MATCHED SALES FOR A PERIOD ; ALSO CALLED INCOME PROFIT OR EARNINGS

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NET LOSS

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EXCESS OF EXPENSES OVER REVENUES FOR A PERIOD

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OWNER CAPITAL

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ACCOUNT SHOWING THE OWNER'S CLAIM ON COMPANY ASSETS; EQUALS OWNER INVESTMENTS PLUS NET INCOME MINUS OWNER WITHDRAWALS SINCE THE COMPANY'S INCEPTION: ALSO REFERRED TO AS EQUITY

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OWNER WITHDRAWALS

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ACCOUNT USED TO RECORED ASSET DISTRIBUTIONS TO THE OWNER

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PARTNERSHIP

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UNINCORPORATED ASSOCIATION OF TWO OR MORE PERSONS TO PURSUE A BUSINESS FOR PROFIT AS CO-OWNERS

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RECORD-KEEPING (BOOKKEEPING)

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PART OF ACCOUNTING THAT INVOLVES RECORDING TRANSACTIONS AND EVENTS

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RETURN

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MONIES RECEIVED FROM AN INVESTMENT OFTEN IN PERCENT FORM.

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REVENUE RECOGNITION PRINCIPLE

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THE PRINCIPLE PRESCRIBING THAT REVENUE IS RECOGNIZED WHEN EARNED

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REVENUES

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GROSS INCREASE IN EQUITY FROM A COMPANY'S BUSINESS ACTIVITIES THAT EARN INCOME ALSO CALLED SALES

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RISK

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UNCERTAINTY ABOUT AN EXPECTED RETURN

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SARBANES-OXLEY ACT (SOX)

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CREATED THE PUBLIC COMPAY ACCOUNTING OVERSIGHT BOARD , REGULATED ANALYST CONFLICTS, IMPOSES CORPORATE GOVERNANCE REQUIREMENTS, ENHANCES ACCOUNTING AND CONTROL DISCLOSURES, IMPACTS INSIDER TRANSACTIONS AND EXECUTIVE LOANS, ESTABLISHES NEW TYPES OF CRIMINAL CONDUCT AND EXPANDS PENALTIES FOR VIOLATIONS OF FEDERAL SECURITIES LAW

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SECURITIES AND EXCHANGE COMMISSION (SEC)

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FEDERAL AGENCY CONGRESS HAS CHARGED TO SET REPORTING RULES FOR ORGANIZATIONS THAT SELL OWNERSHIP SHARES TO THE PUBLIC

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SHAREHOLDERS (STOCKHOLDERS)

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OWNERS OF A CORPORATION

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SHARES

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EQUITY OF A CORPORATION DIVIDED INTO OWNERSHIP UNITS ALSO CALLED STOCK

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SOLE PROPRIETORSHIP

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BUSINESS OWNED BY ONE PERSON THAT IS NOT ORGANIZED AS A CORPORATION

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STATEMENT OF CASH FLOWS

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A FINANCIAL STATEMENT THAT LISTS CASH INFLOWS (RECEIPTS) AND CASH OUTFLOWS (PAYMENTS) DURING A PERIOD ARRANGED BY OPERATING, INVESTING, AND FINANCING

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STATEMENT OF OWNER'S EQUITY

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REPORT OF CHANGES IN EQUITY OVER A PERIOD; ADJUSTED FOR INCREASES AND FOR DECREASES

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TIME PERIOD ASSUMPTION

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ASSUMPTION THAT AN ORGANIZATION'S ACTIVITIES CAN BE DIVIDED INTO SPECIFIC TIME PERIODS SUCH AS MONTHS, QUARTERS, OR YEARS.

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WITHDRAWALS

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PAYMENT OF CASH OR OTHER ASSETS FROM A PROPRIETORSHIP OR PARTNERSHIP TO ITS OWNER OR OWNERS