Financial Accounting Chapters 1-5

Front 1

Annual Report

Back 1

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 2

Assets

Back 2

Resources owned by a business

Front 3

Auditors Report

Back 3

A report prepared by an independant outside auditor stating the auditors opinion as to the fairness if the presentation of the financial position and results of operations and thier conformance with generally accepted accounting standards

Front 4

Balance Sheet

Back 4

Reports the assets and claims to those assets at a specific point in time

Front 5

Basic Accounting Equation

Back 5

Assets = Liabilities + Stockholders Equity

Front 6

Common Stock

Back 6

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

Front 7

Corporation

Back 7

Organized as a separate legal entity having ownership divided into transferable shares of stock

Front 8

Dividends

Back 8

Payments of cash from a corporation to its stockholders

Front 9

Income Statement

Back 9

Presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time

Front 10

Liabilities

Back 10

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

Front 11

Partnership

Back 11

A business owned by two or more persons associated as partners

Front 12

Retained Earnings

Back 12

The amount of net income retained in the corporation

Front 13

Retained Earnings Statement

Back 13

Summarizes the amounts and causes of changes in retained earnings for a specific period of time

Front 14

Revenue

Back 14

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

Front 15

Sarbanes Oxley Act

Back 15

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

Front 16

Sole Proprietorship

Back 16

A business owned by one person

Front 17

Stockholders Equity

Back 17

The owners claim on total assets

Front 18

Conservatism

Back 18

The approach of choosing an accounting method, when alternatives exist, that will least likely overstate assets and net income

Front 19

Current Assets

Back 19

Cash and other resources that companies reasonably expect to convert to cash or use up within one year or the operating cycle, whichever is longer

Front 20

Current Liabilities

Back 20

Obligations that the company expects to pay within the next year or operating cycle

Front 21

Current Ratio

Back 21

A measure used to evaluate a company's liquidity and short term debt paying ability; computes as current assets divided by current liabilities

Front 22

Earnings Per Share

Back 22

Net Income minus preferred stock dividends divided by the average number of common shares outstanding during the year

Front 23

Economic Entity Assumption

Back 23

An assumption that every economic entity can be separately identified and accounted for

Front 24

Financial Accounting Standards Board (FASB)

Back 24

The primary accounting standard setting body in the united states

Front 25

Full disclosure principle

Back 25

Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statements

Front 26

Going Concern assumption

Back 26

The assumption that the company will continue in operation for the foreseeable future.

Front 27

Materiality

Back 27

The constraint of determining whether an item is large enough to likely influence the decision of an investor or creditor

Front 28

Monetary Unit Assumption

Back 28

An assumption that requires that only those things that can be expressed in money are included in the accounting records

Front 29

Property, Plant, and Equipment

Back 29

Assets with relatively long useful lives that companies use in operating the business and are not intended for resale

Front 30

Securities and Exchange Comission (SEC)

Back 30

The agency of the US government that overees US financial markets and accounting standard setting bodies

Front 31

Time Period Assumption

Back 31

An assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business

Front 32

Working Capital

Back 32

The difference between the amounts of current assets and current liabilities.

Front 33

Chart of Accounts

Back 33

A list of a company's accounts

Front 34

Journal

Back 34

An accounting record in which transactions are initially recorded in chronological order

Front 35

Journalizing

Back 35

The procedure of entering transaction data in the journal

Front 36

Posting

Back 36

The procedure of transferring journal entry amounts to the ledger accounts

Front 37

T account

Back 37

The basic form of an account

Front 38

Trial Balance

Back 38

A list of accounts and their balances at a given time

Front 39

Credit

Back 39

The right side of the account

Front 40

Debit

Back 40

Left side of the account

Front 41

Book value

Back 41

The difference between the cost of a depreciable asset and its related accumulated depreciation.

Front 42

Closing Entries

Back 42

Entries at the end of accounting period to transfer the balances of temporary accounts to a permanent stockholders equity account, Retained Earnings

Front 43

Fiscal Year

Back 43

An accounting period that is one year long

Front 44

Permanent Accounts

Back 44

Balance sheet accounts whose balances are carried forward to the next accounting period

Front 45

Revenue recognition principle

Back 45

The principle that companies recognize revenue in the accounting period in which it is earned.

Front 46

Temporary Accounts

Back 46

Revenue, Expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period

Front 47

Unearned Revenue

Back 47

Cash received before a company earns revenues and recorded as a liability until earned

Front 48

Useful Life

Back 48

The Length of service of a productive asset HOW TO FIGURE DEPRECIATION

Front 49

Profit Margin Ratio

Back 49

Measures the percentage of each dollar of sales that results in net income, computed by dividing net income by net sales

Front 50

Sales discount

Back 50

A reduction given by a seller for prompt payment of a credit sale.