Chelsea Katz BMGT220 EXAM 1 STUDY GUIDE Chapter 1 Introduction to Accounting Business Chapter 2 Analyzing Transactions Chapter 3 The Adjustment Process CHAPTER 1 Key Terms definition of an account type the liability created by a PURCHASE on account a claim against the customer created by selling merchandise Account form the form of balance sheet that resembles the basic format of the accounting equation with assets on the left side and liabilities and stockholder s equity sections on the right side Account payable Account receivable or services on credit Accounting an information system that provides reports to users about the economic activities and condition of a business Accounting equation ASSETS LIABILITIES STOCKHOLDER EQUITY Assets the resources owned by a business anything you can CONTROL Balance Sheet a list of the assets liabilities and stockholder s equity as of a specific date usually at the close of the last day of a month or a year Business An organization in which basic resources inputs such as materials labor are assembled and processed to provide goods or services outputs to customers Business entity concept a concept of accounting that limits the economic data in the accounting system to data related directly to the activities of the business Business transaction an economic event or condition that directly changes an entity s financial condition or its results of operations Capital Stock the portion of a corporation s stockholder s equity contributed by investors owners in exchange for shares of stock Certified Public Accountant CPA public accountants who have met a state s education experience and examination requirements Cost concept a concept of accounting that records the amounts initially in the accounting records at their cost or purchase price Dividends Earnings the amount by which revenues EXCEED expenses Ethics moral principles that guide the conduct of individuals Expenses revenues Fees Earned revenue from providing services assets used up or services consumed in the process of generations distributions of a corporation s earnings to stockholders Financial Accounting the branch of accounting that is concerned with recording transactions using generally accepted accounting principles GAAP for a business or other economic unit and with a periodic preparation of various statements from such records Financial Accounting Standards Board The authoritative body that has the primary responsibility for developing accounting principles Financial Statements financial reports that summarize the effects of events on a business Generally accepted accounting principles GAAP generally accepted guidelines for the preparation of financial statements General purpose financial statements a type of financial accounting report that is distributed to external users The term general purpose refers to the wide range of decision making needs that these reports are designed to serve Income statement a summary of the revenue and expenses for a specific period of time such as a month or a year Interest revenue money received for interest International Accounting Standards Board IASB an organization that issues international financial reporting standards for many countries outside the United States Liabilities the rights of creditors that represent debts of the business Limited Liability Concept a business form consisting of one or more persons or entities filing an operating agreement with a state to conduct business with limited liability to the owners yet treated as a partnership for tax purposes Management Managerial Accounting the branch of accounting that uses both historical and estimated data in providing information that management uses in conducting daily operations in planning future operations and in developing overall business strategies Manufacturing Business a type of business that changes basic inputs into products that are sold to customers Matching concept a concept of accounting in which expenses are matched with the revenue generated during a period by those expenses Merchandising business a type of business that purchases products from other businesses and sells them to customers Net income net profit the amount by which revenues exceed expenses Net loss the amount by which expenses exceed revenues Objectivity Concept a concept of accounting that requires the amounts recorded in the accounting records to be based on objective evidence Owner s Equity the owner s right to the assets of the business for a proprietorship partnership or limited liability company Partnership an unincorporated business form consisting of two or more persons conducting business as co owners for profit Prepaid expenses future Private accounting the field of accounting whereby accountants are employed by a business form or a not for profit organization items such as supplies that will be used in the business in the Profit the difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services Proprietorship a business owned by one individual Public accounting the field of accounting where accountants and their staff provide services on a fee basis Ration of liabilities to stockholders equity a comprehensive leverage ration that measures the relationship of the claims of credits to stockholder s equity Rent revenue money received for rent Retained earnings the stockholders equity created from business operations through revenue and expense transactions net income retained in a corporation Retained earnings statement a summary of the changes in the retained earnings in a corporation for a specific period of time such as a month or a year Revenue to customers Sales the total amount charged customers for merchandise sold including cash sales and sales on account Securities and Exchange Commission SEC an agency of the US government that has authority over the accounting and financial disclosures for companies whose shares of ownership stock are traded and sold to the public Service business a business providing services rather than products to customers Statement of Cash Flows a summary of the cash receipts and cash payments for a specific period of time such as a month or a year Stockholder s Equity the stockholder s right to the assets of the business represented by the balance of the capital stock and retained earnings accounts Unit of measure concept a concept of accounting requiring that
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