ACCOUNTING 221: CHAPTER 1
32 Cards in this Set
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market
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a group of people or entities organized to exchange items of value
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profit
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the difference between cost and market value
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earnings
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shared with resource owners and converse agents whpo efficiently satisfy consumer preferences has high of this
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financial resources
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money
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investors
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provide financial resources in exchange for ownership interests in business . Owners expect business to return to them a share of the business income earned
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creditors
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lend financial resources to businesses. Instead of a share of business income, creditors expect business to repay borrowed resources at a future date
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assets
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resources controlled by a business
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liquidation
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selling all of a companies assets in which sale proceeds are returned to investors and creditors
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physical resources
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natural resources
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labor resources
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intellectual and physical labor
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accounting information external users need is provided by what type of accounting?
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finanical (stakeholder, investors creditors)
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accounting information needed by internal users ( stakeholders and managers, employers in a business) is provided by what type of accounting ?
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managerial accouting
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Financial Accounting Standards Board
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privately funded organization with the primary authority for establishing accounting standards in the United States
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GAAP
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Generally Accepted Accounting Principles
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Reporting Entities
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The people or businesses accountants report on are called this.
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financial statements
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has ten elements : assets, liabilities, equity, contributed capital, revenue, expenses, distributions, and net income
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accounting equation
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Equality involving a company’s assets, liabilities, and equity;
Assets=Liabilities+Equity
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retained earnings
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portion of assets that has been provided by earnings activities and not returned as dividends
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stockholders equity
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common stock+ retained earnings
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asset source transactions
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increases total assets and total claims
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ASSET SOURCE TRANSACTIONS
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•increase the total amount of assets and increase the total amount of claims
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asset exchange transactions
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decrease one asset and increase another asset
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asset use transactions
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decrease total amount of assets and the total amount of claims
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income statement
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matches expenses with the revenue that occur when operating a business
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net income
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when revenues exceeds expenses
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net loss
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when expenses are greater than revenue
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matching concept
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practice of paring revenues with expenses on the income statement
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statement of cash flows
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explains how a company obtained and used cash during the accounting period
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financing activities
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obtaining cash(infow) from owners or paying cash (outflow) to owners (dividends)
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investing activities
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paying cash (outflow) to purchase long term assets or receiving cash (inflow) from selling long term assets
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operating activities
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receiving cash (inflow) from revenue and paying cash (outflow) for expenses
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closing
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the act of transferring the balances
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ACCOUNTG 221: Chapter 1