Financial Accounting - Chapter 1

Front 1

Accounting

Back 1

The information system that identifies, records, and communicates the economic events of an organization to interested users.

Front 2

Annual report

Back 2

A report prepared by corporate management that presents financial information including financial statements, notes, a management discussion and analysis section, and an independent auditor's report.

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 generally accepted accounting standards.

Front 5

Balance sheet

Back 5

A financial statement that reports the assets and claims to those assets at a specific point in time.

Front 6

Basic accounting equation

Back 6

Assets = Liabilities + Stockholders' Equity

Front 7

Certified Public Accountant (CPA)

Back 7

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

Front 8

Common stock

Back 8

Term used to describe the total amount paid in by stockholders for the shares they purchase.

Front 9

Comparative statements

Back 9

A presentation of the financial statements of a company for more than one year.

Front 10

Corporation

Back 10

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

Front 11

Dividends

Back 11

Payments of cash from a corporation to its stockholders.

Front 12

Expenses

Back 12

The cost of assets consumed or services used in the process of generating revenues.

Front 13

Income statement

Back 13

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

Front 14

Liabilities

Back 14

The debts and obligations of a business. Liabilities represent the amounts owed to creditors.

Front 15

Management discussion and analysis (MD&A)

Back 15

A section of the annual report that presents management's views on the company's ability to pay near-term obligations, its ability to fund operations and expansion, and its results of operations.

Front 16

Net income

Back 16

The amount by which revenues exceed expenses.

Front 17

Net loss

Back 17

The amount by which expenses exceed revenues.

Front 18

Notes to the financial statements

Back 18

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

Front 19

Partnership

Back 19

A business owned by two or more persons associated as partners.

Front 20

Retained earnings

Back 20

The amount of net income retained in the corporation.

Front 21

Retained earnings statement

Back 21

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

Front 22

Revenue

Back 22

The increase in assets that result from the sale of a product or service in the normal course of business.

Front 23

Sarbanes-Oxley Act

Back 23

Regulations passed by Congress in 2002 to try to reduce unethical corporate behavior.

Front 24

Sole proprietorship

Back 24

A business owned by one person.

Front 25

Statement of cash flows

Back 25

A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.

Front 26

Stockholders' equity

Back 26

The owners' claim on total assets.