ACG Exam 1 Review

Matching Principle

A company records the expenses incurred to generate the revenues reported.

Full Disclosure Principle

A company reports details behind financial statements that would impact users' decisions.

Public Accountants

Accounting professionals who provide services to many clients.

Net income

Amount a business earns after paying all expenses and costs associated with its sales and revenues.

Tax Accounting

An accounting area that includes planning future transactions to minimize taxes paid.

Audit

An examination of an organization's accounting system and records that adds credibility to financial statements.

General accounting principle

Derived from long-used and generally accepted accounting practices.

Business entity assumption

Every business is accounted for separately from its owner or owners.

Going-concern assumption

Financial statements reflect the assumption that the business continues operating.

Cost Principle

Information is based on actual costs incurred in transactions.

Ethics

Principles that determine whether an action is right or wrong.

Revenue recognition principle

Revenue is recorded only when the earnings process is complete.

Specific accounting principle

Usually created by a pronouncement from an authoritative body.

Time Period Assumption

accounting concept that assumes that the economic life of the business can be divided into artificial time periods.

Monetary unit assumption

concept of accounting requiring that economic data be recorded in dollars. Money is both the common factor of all business transactions and the only feasible unit of measurement that can be used to achieve uniform financial data.

Generally Accepted Accounting Principle (GAAP)

concepts and rules financial accounting is governed by

Securities and Exchange Commission (SEC)

government agency that has the legal authority to set GAAP

Financial Accounting Standards Board (FASB)

private sector group that sets the rules and principles