Ch.1

Front 1

Accounting

Back 1

An information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an orgzn's bus. activities.

Front 2

Identifying

Back 2

requires selecting transactions and events relevant to an organization

ex: sale of ipods by Apple

Front 3

Recording

Back 3

requires keeping a chronological log of transactions and events measured in dollars and classified and summarized in a useful format.

Front 4

Communicating

Back 4

requires preparing accounting reports such as financial statements

Also requires analyzing and interpreting such reports

Front 5

Recordkeeping
or
Bookkeeping

Back 5

recording of transactions and events, either manually or electronically

Front 6

External Information Users

Back 6

have limited access to an organizations information. Yet their business decisions depend on info. that is reliable, relevant, and comparable

ex's: Lenders, Shareholders, Gov't, consumer groups,external auditors, customers

Front 7

Internal Information Users

Back 7

Those directly involved in managing and operating an organization.

ex's: Managers, officers and directors, Internal Auditors, Sales Staff, Budget Officers, Controllers

Front 8

Financial Accounting

Back 8

Area of accounting aimed at serving external users by providing them with financial statements

Front 9

Managerial Accounting

Back 9

Area of accounting that serves the decision making needs of internal users

Front 10

Ethical Guidelines

Back 10

Identify ethical concerns>
Analyze options>
Make ethical decision

Front 11

Generally Accepted Accounting Principles
(GAAP)

Back 11

Aims to make information in financial statements relevant, reliable, and comparable.

Front 12

Relevant Information

Back 12

information that affects the decisions of its users

Front 13

Reliable Information

Back 13

information that is trusted by users

Front 14

Comparable Information

Back 14

information that is helpful in contrasting organizations

Front 15

Financial Accounting Standards Board
(FASB)

Back 15

The private group that sets both broad and specific principles

Front 16

Securities Exchange Commission
(SEC)

Back 16

The gov't group that establishes reporting requirements for companies that issue stock to the public

Front 17

General Principles of Acct.

Back 17

are the basic assumptions,concepts, and guidelines for preparing financial statements

Front 18

Specific Principles of Acct.

Back 18

are detailed rules used in reporting business transactions and events

Front 19

Objectivity Principle

Back 19

Acct. information is supported by independent, unbiased evidence

Front 20

Cost Principle

Back 20

Means that Acct. information is based on actual cost

Cost is measured on a cash or equal to cash basis(the cash value of what is given up or received)

Front 21

Going-Concern principle

Back 21

Accounting information reflects an assumption that the business will continue operating instead of being closed or sold

Front 22

Monetary-unit principle

Back 22

We can express transactions and events in monetary or money, units

Front 23

Revenue recognition principle

Back 23

provides guidance on when a company must record revenue

Front 24

Business entity prinicple

Back 24

a business is accounted for seperately from other business entities, including its owner

Front 25

sole proprietorship

Back 25

a business owned by one person
-unlimited liability
-proprietor's income is not subject to a business income tax, but rather the owners personal income tax
-not a seperate legal entity from its owner
-no special legal requirements must be met to start a proprietorship

Front 26

Partnership

Back 26

a business owned by two or more people
-no special legal requirements must be met to start a partnership
-only requirement is an agreement between partners to run a business together
-not a seperate legal entity from its owners
-unlimited liability for its partners...excluding the three types of partnerships limit liability (LP,LLP,LLC)

Front 27

Limited Partnership (LP)

Back 27

includes a general partner(s) with unlimited liability and a limited partner(s) with liability restricted to the amount invested

Front 28

Limited Liability Partnership (LLP)

Back 28

restricts partners' liability to their own acts and the acts of individuals under their control
-protects an innocent partner from the negligence of another partner, yet all partners remain responsible for partnershop debts

Front 29

Limited Liability Company (LLC)

Back 29

offers the limited liability of a corporation and the tax treatment of a partnership
(majority of proprietorships and partnerships are now organized as an LLC)

Front 30

Corporation

Back 30

a business legally seperate from its owners
-responsible for its own acts/debts
- double taxation (1) corporation income is taxed as well as (2) any distribution of income to its owners (shareholders)

-exception to this double taxation is an S corporation

Front 31

Sarbanes-Oxley Act (SOX)

Back 31

used to help curb financial abuses at companies that issue their stock to the public

Front 32

Assets

Back 32

resources owned or controlled by the company that are expected to yield future benefits

ex:musical instruments for a rock band, or land for a vegetable grower

Front 33

Liabilities

Back 33

Creditor's claims on assets.
-reflect obligations to provide assets, products, or services to others

Front 34

Equity

Back 34

Owners claim on assets

E=A-L

Front 35

Contributed Capital

Back 35

refers to the amount that stockholders invest in the company...included under the title common stock

Front 36

Retained Earnings

Back 36

refers to income that is not distributed to its stockholders

Front 37

income

Back 37

revenues minus expenses

Front 38

Dividends

Back 38

distribution of assets to stockholders

Front 39

Revenues

Back 39

increase retained earnings and are the assets earned from a company's earning activities

ex. consulting services provided, sales of products, facilities rented to others, and commissions from services

Front 40

Expenses

Back 40

decrease retained earnings and are the cost of assets or services used to earn revenues

ex. cost of employee time, use of supplies, and advertising, utilities, and insurance services from others.

Front 41

Expanded Acct. Equation

Back 41

A=L+E
A=L+CC+RE
A=L+CS(-D+R-E)

Front 42

External Transactions

Back 42

exchanges of value between two entities which yield changes in the acct equation

Front 43

Internal Transactions

Back 43

exchanges within an entity; may also affect the acct. eq.

Front 44

Income Statement

Back 44

describes a company's revenues and expenses along with the resulting net income or loss over a period of time due to earnings activities

Front 45

Statement of Retained Earnings

Back 45

Explains changes in retained earnings from net income (or loss) and from any dividends over a period of time

Front 46

Balance Sheet

Back 46

describes a company's financial position at a point in time

Front 47

Statement of cash flows

Back 47

identifies cash inflows and cash outflows over a period of time