Ch 1 & 2

Front 1

provides relevant financial information to various external users.

Back 1

Financial accounting

Front 2

process of providing financial statement information to external users

Back 2

Financial reporting

Front 3

Obligation to transfer cash or other resources as a result of a past transaction.

Back 3

liability

Front 4

Dividends paid by a corporation to its shareholders.

Back 4

distribution

Front 5

Inflow of an asset from providing a good or service.

Back 5

revenue

Front 6

The financial position of a company.

Back 6

balance sheet

Front 7

Increase in equity during a period from non-owner transactions.

Back 7

comprehensive income

Front 8

Increase in equity from peripheral or incidental transaction.

Back 8

gain

Front 9

Sale of an asset used in the operations of a business for less than the asset's book value.

Back 9

loss

Front 10

The owner's residual interest in the assets of a company.

Back 10

equity

Front 11

An item owned by the company representing probably future benefits

Back 11

asset

Front 12

Revenues plus gains less expenses and losses

Back 12

income statement

Front 13

An owner's contribution of cash to a corporation in exchange for ownership shares of stock.

Back 13

capital investment

Front 14

Outflow of an asset related to the production of revenue

Back 14

expense

Front 15

Information is useful in predicting the future

Back 15

predictive value

Front 16

Pertinent to the decision at hand

Back 16

relevance

Front 17

Information is available prior to the decision

Back 17

timeliness

Front 18

Decreases in equity resulting from transfers to owners

Back 18

Distribution to owners

Front 19

information confirms expectations

Back 19

Confirmatory value

Front 20

Users understand the information in the context of the decision being made

Back 20

Understandability

Front 21

Results if an asset is sold for more than its book value

Back 21

Gain

Front 22

Agreement between a measure and the phenomenon it purports to represent

Back 22

Faithful representation

Front 23

The change in equity from nonowner transactions

Back 23

Comprehensive income

Front 24

Concerns the relative size of an item and its effect on decisions

Back 24

Materiality

Front 25

Important for making interfirm comparisons

Back 25

Comparibility

Front 26

The absence of bias

Back 26

Neutrality

Front 27

The process of admitting information into financial statements

Back 27

Recognition

Front 28

Applying the same accounting practices over time

Back 28

Consistency

Front 29

Requires consideration of the costs and value of information

Back 29

Cost effectiveness

Front 30

Implies consensus amount different measures

Back 30

Verifiability

Front 31

Types of adjustments (4)

Back 31

Prepayments (adjusting what has already been recorded):

prepaid expenses: affects expenses & assets(IS & BS)

Unearned revenue: affects liabilities & revenues (BS & IS)

Accrued revenue: affects assets & revenue (BS & IS)

Accrued expenses: affects liabilities & expenses (BS & IS)

All involved adjustments to a balance sheet account and income statement

Front 32

Normal debit balance accounts:

Back 32

assets & expenses

Front 33

Normal credit balances:

Back 33

liabilities, equity, revenues