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