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