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43 Cards in this Set

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Account:
each item in a financial statement
Accounts payable:
amounts owed to vendors for purchases on open accounts
Accounts receivable:
amounts due from customers for sales on open account
Accrual basis:
a process of accounting that recognizes the impact of transaction on the financial statements in the time periods when revenues and expenses occur instead of when cash is received or disbursed.
Accrue:
to accumulate a receivable or payable during a given period even though no explicit transaction occurs
Adjustments:
recording of implicit transaction, in contrast to the explicit transaction that trigger nearly all day-to-day routine entries
Assets:
economic resources that are expected to benefit future activities
Audit:
an examination or in-depth inspection of financial statements and companies’ records that is made in accordance with generally accepted auditing standards. It culminated with the accountant’s testimony that management’s financial statements are in conformity with GAAP.
Balance sheet:
a snapshot of the financial status of an organization at an instant of time
Cash basis:
a process of accounting where revenue and expense recognition would occur when cash is received and disbursed
Conservatism convention:
selecting the method of measurement that yields the gloomiest immediate results.
Continuity convention (going concern convention):
the assumption that an organization will continue to exist and operate
Cost recovery:
a concept in which assets such as inventories, prepayments, and equipment are carried forward as assets because their costs are expected to be recovered in the form of cash inflows (or reduced cash outflows) in future periods.
Cost-benefit criterion:
an approach that implicitly underlies the decision about the design of accounting systems. As a system is changed, its potential benefits should exceed its additional costs.
Credit:
an entry on the right side of an account—something owed
Debit:
an entry on the left side of an account—something coming
Dividends:
distributions of assets to stockholders that reduce retained income
Double-entry system:
a method of record keeping in which each transaction affects at least two accounts
Equities:
the claims against, or interest in, an organization’s assets
Expenses:
decreases in ownership claims arising from delivering goods or services or using up assets
Financial Accounting Standard Board (FASB):
The primary regulatory body over accounting principles and practices in the US. Consisting of seven fulltime members, it is an independent creation of the private sector.
General ledger:
a collection of the group of accounts that supports the items shown in the major financial statements
Income statement:
a statement that summarizes a company’s revenues and expenses. It measures the performance of an organization by matching its accomplishments (revenue from customers, which is usually called sales) and its efforts*cost of good sold and other expenses).
International Accounting Standards Board (IASB):
The group that establishes international GAAP-generally accepted accounting principles.
Ledger accounts:
a method of keeping track of how multitudes of transactions affect each particular asset, liability, revenue, and expense.
Liabilities:
the entity’s economic obligations to non-owners
Matching:
the linking of revenues (as measured by the selling prices of goods and services delivered) and efforts or expenses (as measured by the cost of goods and services used) with a particular period for which a measurement of income is desired.
Materiality:
the accounting convention that justifies the omission of insignificant information when its omission or misstatement would not mislead a user of the financial statements.
Net worth:
a synonym for owner’s equity
Objectivity (verifiability):
accuracy supported by a high extent of consensus among independent measures of an item.
Owner’s equity:
the excess of the assets over the liabilities
Paid-in capital:
the ownership claim arising from funds paid-in by the owners
Partnership:
an organization that joins two or more individuals together as co-owners
Profits(earnings, income):
the excess of revenues over expenses
Residual value:
The predicted sales value of a long-lived asset at the end of its useful life.
Retained income (retained earnings):
the ownership claim arising from the reinvestment of previous profits
Revenue:
increases in ownership claims arising from the delivery of goods or services
Securities and Exchange Commission (SEC):
By federal law, the agency with the ultimate responsibility for specifying the generally accepted accounting principles for US companies whose stock is held by the general investing public.
Sole proprietorship:
a business entity with a single owner
Source documents:
explicit evidence of any transactions that occur in the entity’s operation, for example, sales slips and purchase invoices.
Stockholders’ equity:
the owners’ equity of a corporation
Transaction:
any event that affects the financial position of an organization
Unexpired cost:
any asset that ordinarily becomes and expense in future periods, for example inventory and prepaid rent