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44 Cards in this Set

  • Front
  • Back
SEC (Securities and Exchange Commission)
US government agency that determines the financial statements that public companies must provide to stockholders and the measurement rules that they must use in producing those statements.
Generally Accepted Accounting Principles (GAAP)
the measurement rules used to develop the information in financial statements
Accounting
the system that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers
Balance Sheet (Statement of Financial Position)
reports the amount of assets, liabilities, and stockholders' equity of an accounting entity at a point in time
Accounting Entity
the organization for which financial data are to be collected
Basic Accounting Equation
Assets=Liabilties+Stockholders' Equity
(A=L+S/E)
Income Statement
(Statement of income, statement of earnings, statement of operations) reports the revenues less the expenses of the accounting period. (revenues-expenses=net income)
Accounting Period
time period covered the financial statements
Statement of Retained Earnings
reports the way that net income and distribution of dividends affected the financial position of the company during the accounting period
Statement of Cash Flows (Cash Flow Statement)
reports inflow and outflows of cash during the accounting period in the categories of operating, investing, and financing
Notes
provide supplemental information about the financial condition of a company without which the financial statements cannot be fully understood
Financial Accounting Standards Board (FASB)
the private sector body given the primary responsibility to work out the detailed rules that become generally accepted accounting principles
Audit
an examination of the financial reports to ensure that they represent what they claim and confirm with GAAP
Public Company Accounting Oversight Board (PCAOB)
the private sector body given the primary responsibility to issue detailed auditing standards
Transaction
An exchange between and entity and other parties
Continuity Assumption
the concept that businesses will operate into the foreseeable future
Balance Sheet
Reports assets, liabilities and stockholders' equity
Liabilities
probable debts or obligations to be paid with assets or services
Assets=Liabilities+Stockholders' Equity
the accounting model
Historical Cost Principle
the concept that assets should be recorded at amount paid on exchange date
Note payable
the account that is credited when money is borrowed from a bank
Dual effects
ever transaction has at least two effects
Retained Earnings
cumulative earnings of a company that are not distributed to owners
Debits
increase assets; decrease liabilities and stockholders' equity
Separate-Entity Assumption
accounts for a business separate from its owners
Current Assets
Economic resources to be used or turned into cash within one year
Accounts Receivable
Amounts owed from customers
Unit-of-measure Assumption
the concept that states that accounting information should be measured and reported in the national monetary unit
Account
a standardized format used to accumulate data about each item reported on financial statements
Losses
Decreases in assets or increases in liabilities from peripheral transactions
Matching Principle
Record expenses when incurred in earning revenue
Revenues
increases in assets or settlements of liabilities from ongoing operations of the business
Time period assumption
report the long life of a company in shorter time periods
operating cycle
the time it takes to to purchase goods or services from suppliers, sell goods or services to customers, and collect cash from customers
Accounting Cycle
process followed by entities to analyze and record transactions, adjust the records at the end of the period, prepare financial statements, and prepare the records for the next cycle.
contra-account
account that is an offset to, or reduction of, the primary account
unearned revenues
previously recorded liabilities that need to be adjust at the end of the accounting period to reflect the amount of revenue earned
accrued revenues
previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and the relative receivable account
prepaid expense
previously acquired assets that need to be adjusted at the end of the accounting period to reflect the amount of expense incurred in using the asset to generate revenue
unqualified audit position
an auditor's statement that the financial statements are fair presentations in all material respects in conformity with GAAP
relevant information
can influence a decision; it is timely and has predictive and/or feedback value
reliable information
is accurate, unbiased, and verifiable
comparable information
allows comparisons across businesses because similar accounting methods have been applied
consistent information
can be compared over time because similar accounting methods have been applied