Business 203 Ch 16

Front 1

Account:

Back 1

each item in a financial statement

Front 2

Accounts payable:

Back 2

amounts owed to vendors for purchases on open accounts

Front 3

Accounts receivable:

Back 3

amounts due from customers for sales on open account

Front 4

Accrual basis:

Back 4

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.

Front 5

Accrue:

Back 5

to accumulate a receivable or payable during a given period even though no explicit transaction occurs

Front 6

Adjustments:

Back 6

recording of implicit transaction, in contrast to the explicit transaction that trigger nearly all day-to-day routine entries

Front 7

Assets:

Back 7

economic resources that are expected to benefit future activities

Front 8

Audit:

Back 8

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.

Front 9

Balance sheet:

Back 9

a snapshot of the financial status of an organization at an instant of time

Front 10

Cash basis:

Back 10

a process of accounting where revenue and expense recognition would occur when cash is received and disbursed

Front 11

Conservatism convention:

Back 11

selecting the method of measurement that yields the gloomiest immediate results.

Front 12

Continuity convention (going concern convention):

Back 12

the assumption that an organization will continue to exist and operate

Front 13

Cost recovery:

Back 13

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.

Front 14

Cost-benefit criterion:

Back 14

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.

Front 15

Credit:

Back 15

an entry on the right side of an account—something owed

Front 16

Debit:

Back 16

an entry on the left side of an account—something coming

Front 17

Dividends:

Back 17

distributions of assets to stockholders that reduce retained income

Front 18

Double-entry system:

Back 18

a method of record keeping in which each transaction affects at least two accounts

Front 19

Equities:

Back 19

the claims against, or interest in, an organization’s assets

Front 20

Expenses:

Back 20

decreases in ownership claims arising from delivering goods or services or using up assets

Front 21

Financial Accounting Standard Board (FASB):

Back 21

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.

Front 22

General ledger:

Back 22

a collection of the group of accounts that supports the items shown in the major financial statements

Front 23

Income statement:

Back 23

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).

Front 24

International Accounting Standards Board (IASB):

Back 24

The group that establishes international GAAP-generally accepted accounting principles.

Front 25

Ledger accounts:

Back 25

a method of keeping track of how multitudes of transactions affect each particular asset, liability, revenue, and expense.

Front 26

Liabilities:

Back 26

the entity’s economic obligations to non-owners

Front 27

Matching:

Back 27

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.

Front 28

Materiality:

Back 28

the accounting convention that justifies the omission of insignificant information when its omission or misstatement would not mislead a user of the financial statements.

Front 29

Net worth:

Back 29

a synonym for owner’s equity

Front 30

Objectivity (verifiability):

Back 30

accuracy supported by a high extent of consensus among independent measures of an item.

Front 31

Owner’s equity:

Back 31

the excess of the assets over the liabilities

Front 32

Paid-in capital:

Back 32

the ownership claim arising from funds paid-in by the owners

Front 33

Partnership:

Back 33

an organization that joins two or more individuals together as co-owners

Front 34

Profits(earnings, income):

Back 34

the excess of revenues over expenses

Front 35

Residual value:

Back 35

The predicted sales value of a long-lived asset at the end of its useful life.

Front 36

Retained income (retained earnings):

Back 36

the ownership claim arising from the reinvestment of previous profits

Front 37

Revenue:

Back 37

increases in ownership claims arising from the delivery of goods or services

Front 38

Securities and Exchange Commission (SEC):

Back 38

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.

Front 39

Sole proprietorship:

Back 39

a business entity with a single owner

Front 40

Source documents:

Back 40

explicit evidence of any transactions that occur in the entity’s operation, for example, sales slips and purchase invoices.

Front 41

Stockholders’ equity:

Back 41

the owners’ equity of a corporation

Front 42

Transaction:

Back 42

any event that affects the financial position of an organization

Front 43

Unexpired cost:

Back 43

any asset that ordinarily becomes and expense in future periods, for example inventory and prepaid rent