accounting- chapter 1
revenues
-the gross increases in stockholders' equity from engaging in business activities entered into for the purpose of earning income
income statement
A financial statement showing the revenue and expenses showing net income or net loss for a fiscal period.
sabarnes-oxley act (SOX)
A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate.
international accounting standards board (IASB)
Accounting standards and practices adapted by many countries outside the United States
international financial reporting standards (IFRS)
International Financial Reporting Standards issued by the International Accounting Standards Board.
historical cost principle
Principle that states that assets and services should be recorded at their actual cost.
corporation
a business organized as a separate legal entity under state corporation laws, where ownership is divided into transferable shares of stock
partnership
a business owned by 2+ persons associated as partners
statement of cash flow
a finical statement that summarizes information about the cash inflows (receipts) and the cash outflows (payments) for a specific period of time
bookkeeping
a part of accounting that involves only the recording of economic events
finical accounting standards board (FASB)
a private organization, that establishes generally accepted accounting principles in the US (GAAP)
fair value principle
an accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell the asset or settle a liability)
monetary unity assumption
an assumption that requires that only those things that can be expressed in money are included in the accounting records
securities and exchange commission (SEC)
an independent agency of the government that regulates financial markets and investment companies
external users
are individuals and organizations outside of the company who wants finical information about the company
expanded accounting equation
assets= liabilities + owner's capital -owner's drawings +revenue -expenses
basic accounting equation
assets= liabilities + owner's equity
economic entity assumption
assumption that requires that the activities of the entity be kept separate and distant from the activities of its owner and all other economic entities
generally accepter accounting principles (GAAP)
common standards that indicate how to report economic events
liabilities
creditor claims against total assets
relevance
financial info that is capable of making a difference in a decision
balance sheet
finical statement that reports the assets, liabilities and owners equity at a specific date
owner's equity statement
finical statement that summarizes the changes in owner's equity for a specific time period
accounting
information system that identifies, records and communicates the economic events of an organization to interested users
internal users
managers who plan, organize and run the business
faithful representation
numbers and descriptions match what really existed or happened- factual records
assets
resources a business own
net loss
the amount by which expenses exceed revenues
net income
the amount by which revenues exceed expenses
investments by owner
the assets an owner puts into the business
expenses
the cost of assets consumed or services used in the process of earning revenue
transactions
the economic events of a business that are recorded by accountants
managerial accounting
the field of accounting that provides internal reports to help users make decisions about their companies
financial accounting
the field of accounting that provides the economic and financial information for investors and creditors and other external users
owner's equity
the ownership claim on total assets
convergence
the process of reducing the differences between U.S. GAAP and IFRS
ethics
the standards of conduct by which one's actions are judged as right or wrong, honest or dishonest and fair or unfair
drawings
withdraw of cash or other assets from an unincorporated business for the personal use of the owner