AC 231 Chapter 1

The rights of creditors are the debts of the business and these are known as ________________________

Liabilities.

The excess of the revenue over the expenses is called _______________________, _____________________, or _________________. If the expenses exceed the revenue, the excess is a ______________

Net income, net profit, earnings, net loss

Managerial accountants employed by a business are employed in ____________________________________

Private accounting

Accountants who provide services on a fee basis are said to be employed in ________________________________. In public accounting, an accountant may practice as an individual or as a member of a public accounting firm. Public accountants who have met a state's education, experience, and examination requirements may become _________________________________________(CPA's). CPA's typically perform general accounting, audit, or tax services. Tends to be a good career for job security and salary.

Public accounting, Certified Public Accountants

Since stockholders own a corporation, the rights of owners of a corporation are called ____________________________________

Stockholders equity.

The __________________________________ requires that economic data be recorded in dollars. Money is a common unit of measurement for reporting financial data and reports.

Unit of measure concept

__________________________ - resembles the basic format of accounting equation, with assets on the left side and the liabilities and owner's equity sections on the right side on the balance sheet.

Account form

The liability created by a purchase on account is called an ___________________________________. Items such as supplies that will be used in the business in the future are called ______________________________, which are assets.

Account payable, prepaid expenses

In such cases, the firm has an asset, called an _____________________________________________, which is a claim against the customer. Fees earned on account are recorded as increases in Accounts Receivable and Fees Earned. When customers pay their accounts, Cash increases, and Accounts Receivable decreases.

Account receivable

Stephen, because you're an idiot and you forget stuff you should know all the time, this is the accounting equation: ______________________________________________________

Assets = Liabilities + Owners Equity

The ________________________________________________ limits economic data in an accounting system to data related directly to the activities of the business. I.E, the business is viewed as an entity separate from its owners, creditors, or other businesses.

Business entity concept

Paying a monthly bill, such as a telephone bill of $168, affects a business's financial condition because it now has less cash on hand. Such an economic event or condition that directly changes an entity's financial condition or its result of operations is a ______________________________________

Business transaction.

Under the ______________________________, amounts are initially recorded in the accounting records at their cost or purchase price.

Cost concept

All financial statements are identified by the name of the business, the title of the statement, and the ____________________________________________. The data presented in the income statement, the statement of owner's equity, and the statement of cash flows are for a period of time. The data presented in the balance sheet are for a specific date.

Date or period of time

________________are moral principles that guide the conduct of individuals.

Ethics

During the month, NetSolutions spent cash or used up other assets in earning revenue. Assets used in this process of earning revenue are called ______________________. Expenses include supplies used and payments for employee wages, utilities, and other services.

Expenses

Different terms are used for the various types of revenues. As illustrated for NetSolutions, revenue from providing services is recorded as ________________________________

Fees earned

Instead of receiving cash at the time services are provided or goods are sold, a business may accept payment at a later date. Such revenues are described as __________________________________________________________________

Fees earned on account or sales on account

Accounting principles and concepts develop from research, accepted accounting practices, and pronouncements of regulators. Within the United States, the ____________________________________________________ (FASB) has the primary responsibility for developing accounting principles.

Financial Accounting Standards

External users of accounting information include investors, creditors, customers, and the government. The area of accounting that provides external users with information is called ____________________________________________

Financial accounting.

After transactions have been recorded summarized, reports are prepared for users. The accounting reports providing this information are called _________________________________________. The primary financial statements of a proprietorship are the income statement, the statement of owner's equity, the balance sheet, and the statement of cash flows.

Financial statements

_____________________________________________________ are one type of financial accounting report that is distributed to external users. The term general-purpose refers to the wide range of decision-making needs that these reports are designed to serve.

General-purpose financial statements

If companies did not follow the same rules when reporting financial information, comparison among companies would be difficult, if not impossible. Thus, financial accountants follow _______________________________________________________(GAAP) in preparing reports. These reports allow investors and other users to compare one company to another.

Generally Accepted Accounting Principles

Ordered Prepared/Financial Statement/Description of Statement 1. ___________________________________ A summary of the revenue and expenses for a specific period of time, such as a month or a year 2. _________________________________ A summary of the changes in the owner's equity that have occured during a specific period of time, such as a month or a year. 3. ____________________________ A list of assets, liabilities, owner's equity as of a specific date, usually at the close of the last day of a month or a year. 4.____________________________ A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.

Income statement, Statement of owner's equity, Balance sheet, Statement of cash flows,

Many countries outside the United States use accounting principles adopted by the ____________________________________________________________ The IASB issues International Financial Reporting Standards (IFRS). Differences currently exist between FASB and IASB accounting principles. Investors and other stakeholders should be alert to these differences in analyzing financial reports of international companies.

International Accounting Standards Board (IASB)

A business entity may take the form of proprietorship, partnership, corporation, or_______________________________________. Three types of business such as, service, merchandising, and manufacturing, may be organized as proprietorships, partnerships, corporations or limited liability companies. Side note: because of the size of a manufacturing business and the resources it requires, these types of businesses are usually in the form of a corporation.

Limited liability company (LLC).

The income statement reports the revenues and expenses for a period of time, based on the __________________________. This concept is applied by matching the expenses incurred during a period with the revenue that those expenses generated.

Matching concept

The rights of a proprietorship, partnership, or limited liability company are called ____________________________.

Owner's equity.

The relationship between liabilities and owner's equity, expressed as a ____________________________________________________

Ratio of liabilities to owners equity

Other examples of revenue include rent, which is recorded as ________________________________, and interest, which is recorded as ________________________________.

Rent revenue, interest revenue

The ______________________ lists the assets, liabilities, and owner's equity in a downward sequence. The report form is the most common form of reporting the balance sheet and for that reason is used in the remainder of this text.

Report form

You may have earned money by painting houses or mowing lawns. If so, you received money for rendering services to a customers. Likewise, a business earns money by selling goods or services to its customers. This amount is called ________________________

Revenue

Revenue from the sale of merchandise is recorded is recorded as __________.

Sales

As a result of the accounting and business frauds, Congress passed laws to monitor the behavior of accounting of business. For example, the __________________________________(SOX) was enacted. SOX established a new oversight body for the accounting profession called the ___________________________________________________________(PCAOB). In addition, SOX established standards for independence, corporate responsibility, and disclosure.

Sarbanes-Oxley Act, Accounting Oversight Board

The FASB publishes Statements of Financial Accounting as well as Interpretations of these Standards. In addition, the ____________________________________________________________ an agency of the US government, has authority over the accounting and financial disclosures for companies whose shares of ownership (stock) are traded and sold to the public. The SEC normally accepts the accounting principles set forth by the FASB. However, the SEC may issue Staff Accounting Bulletins on accounting matters that may not have been addressed by the FASB.

Securities and Exchange Commission (SEC)