Chapter 1 - Intro To Financial Statements

Front 1

Accounting

Back 1

The process of identifying, recording, and communicating the economic events of a business to interested users of the information.

Front 2

Annual Report:

Back 2

A report prepared by corporate management that presents financial information including financial statements, notes, and the management discussion and analysis.

Front 3

Assets:

Back 3

Resources owned by a business.

Front 4

Auditor's Report:

Back 4

A report prepared by an independent outside auditor stating the auditor's opinion as to the fairness of the presentation of the financial position and results of operations and their conformance with accepted accounting procedures.

Front 5

Balance Sheet:

Back 5

A financial statement that reports the assets, liabilities and stockholders' equity at a specific date.

Front 6

Basic Accounting Equation:

Back 6

Assets = Liabilities + Stockholder's equity.

Front 7

Certified Public Accountant:

Back 7

An individual who has met certain criteria and is thus allowed to perform audits of corporations.

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Common Stock:

Back 8

Stock representing the primary ownership interest in a corporation. In the balance sheet it represents the amount paid in by stockholders.

Front 9

Comparative Statements:

Back 9

A presentation of the financial statements of a company for multiples years.

Front 10

Corporation:

Back 10

A business organized as a separate legal entity having ownership divided into transferable shares of stock.

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Cost Principle:

Back 11

An accounting principle that states that assets should be recorded at their cost.

Front 12

Dividends:

Back 12

Cash or other assets from a corporation to its stockholders.

Front 13

Economic Entity Assumption:

Back 13

An assumption that economic events can be identified with a particular unit of accountability.

Front 14

Expenses:

Back 14

The cost of assets consumed or services used in ongoing operations to generate revenues.

Front 15

Full Disclosure Principle:

Back 15

Accounting principle that dictates that circumstances and events that make a difference to financial statement users should be disclosed.

Front 16

Going Concern Assumption:

Back 16

The assumption that the enterprise will continue in operation long enough to carry out its existing objectives and commitments.

Front 17

Income Statement:

Back 17

A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time.

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Liabilities:

Back 18

The debts and obligations of a business. Liabilities represent claims of creditors on the assets of a business.

Front 19

Management Discussion and Analysis:

Back 19

A section of the annual report that presents management's view on the company's short-term debt paying ability, expansion, financing, and results.

Front 20

Monetary Unit Assumption:

Back 20

An assumption stating that only transaction data that can be expressed in terms of money be included in the accounting records of the economic entity.

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Net Income:

Back 21

The amount by which revenues exceed expenses.

Front 22

Net Loss:

Back 22

The amount by which expenses exceed revenues.

Front 23

Notes to the Financial Statement:

Back 23

Notes that clarify information presented in the financial statements, as well as expand upon it where additional detail is needed.

Front 24

Partnership:

Back 24

A business owned by more than one person.

Front 25

Retained Earnings:

Back 25

The amount of net income kept in the corporation for future use, not distributed to stockholders as dividends.

Front 26

Retained Earnings Statement:

Back 26

A financial statement that summarizes the changes in retained earnings for a specific period of time.

Front 27

Revenues:

Back 27

The assets that result from the sale of a product or service.

Front 28

Sole Proprietorship:

Back 28

A business owned by one person.

Front 29

Statement of Cash Flows:

Back 29

A financial statement that provides information about the cash inflows (receipts) and cash outflows (payments) for a specific period of time.

Front 30

Stockholders' Equity:

Back 30

The stockholders' claim on total assets.

Front 31

Time period assumption:

Back 31

An accounting assumption that the economic life of a business can be divided into artificial time periods.