ACCT 2010: CHAPTER 1 TERMS
35 Cards in this Set
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Accounting Equation
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Assets = Liabilities - Stockholder's Equity
Company's resources = creditors' and owners' claims to those resources
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Assets
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Resources owned by a company
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Auditors
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Trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company's financial statements
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Balance Sheet
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A financial statement that presents the financial position of the company on a particular date
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Comparability
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The ability of users to see similarities and differences between two diferent business activities
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Consistency
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The use of similar accounting procedures either over time for the same company, or across companies at the same point in time
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Corporation
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An entity that is legally separate from its owners
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Cost effectiveness
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Financial accounting information is provided only when the benefits of doing so exceed the costs
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Decision usefulness
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The ability of the information to be useful in decision making
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Dividends
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Cash payments to stockholders
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Economic Entity Assumption
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All economic events with a particular economic entity can be identified
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Expenses
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Costs of providing products and services
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Faithful Representation
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Accounting information that is verifiable, neutral, and complete
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Financial Accounting
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Measurement of business activities of a company and communication to those measurements to external parties for decision-making purposes
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Financial Statements
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Periodic reports published by the company for the purpose of providing information to external users
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Financing activities
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Transactions involving external sources of funding
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GAAP
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Generally Accepted Accounting Principles; The rules of financial accounting
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Going concern assumption
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In the absence of information to the contrary, a business entity will continue to operate indefinitely
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Income statement
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a financial statement that reports the company's revenues and expenses over an interval of time
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investing activities
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transactions involving the purchase and sale of (1) long-term resources such as land, buildings, equipment, and machinery and (2) any resources not directly related to a company's normal operations
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liabilities
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amounts owed to creditors
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materiality
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the impact of financial accounting information on inverstors' and creditors' decisions
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monetary unit assumption
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a unit or scale of measurement can be used to measure financial statement elements
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net income
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difference between revenues and expenses
net income = revenues - expenses
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operating activities
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transactions involving the primary operations of the company, such as providing products and services to customers and the associated costs of doing so, like utilities, taxes, adverstising, wages, rent, and maintenance
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partnership
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business owned by two or more people
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periodicity assumption
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the economic life of an enterprise (presumed to be indefinite) can be divided into artificial time periods for financial reporting
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relevance
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accounting information that possesses confirmatory value, predictive value, and/or timeliness
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retained earnings
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cumulative amount of net income earned over the life of the company that has not been distributed to stockholders as dividends
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revenues
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amounts earned from selling products or services to customers
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sole proprietorship
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a business owned by a single person
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statement of cash flows
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a financial statement that measures activities involving cash receipts and cash payments over an interal of time
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stockholder's equity
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stockholders' , or owners' , claims to resources, which equal the difference between total assets and total liabilities
S.E. = A - L
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statement of stockholder's equity
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a financial statement that summarizes the changes in stockholders' equity over an interval of time
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understandability
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users must understand the information within the context of the decision they are making
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Chapter 1 Study Cards