Accounting 101 Chp. 1 Terms

Sole proprietorship

A business entity owned by one person who is legally responsible for the debts and taxes of the business.

Partnership

A business entity owned by two or more people who are legally responsible for the debts and taxes of the business.

Economic entity

A business or orginization whose major purpose is to produce a profit for its owners.

Social entity

A nonprofit orginization, such as a city, public school, or public hospital.

Accounting system

A process designed to accumulate, classify, and summarize financial data.

Exposure draft

A proposed solution to a problem being considered by Financial Accounting Standards Board.

Corporation

A publicly or pirvately owned business entity that is separate from its owners and has a legal right to own property and do business in it's own name; stockholders are not responsible for the debts or taxes of the business.

Tax accounting

A service that involves tax compliance and tax planning.

Statements of Financial Accounting Standards

Accounting principles established by the Financial Accounting Standars Boards

Managerial accoutning

Accounting work carried on by an accountant employed by a single business in industry.

Governmental accounting

Accounting work performed for a federal, state, or local govermental unit

Generally accepted accounting principles (GAAP)

Accouting standards developed and applied by professional accountants.

Discussion memorandum

An explanation of topic under consideration by the Financial Accounting Standards Board.

Certified public accoutnant (CPA)

An independant accountant who provides accoutning services to the public for a fee.

Auditor's report

An independant accoutnant's review of a firm's financial statements.

Entity

Anything having its own sperate identity, such as an individual, a town, a university, or a business.

Stock

Certificates that represent ownership of a corporation.

Public accountants

Members of a firms that perform accounting service for other companies.

Creditor

One whom money is owed.

Financial Statements

Periodic reports of a firm's financial position or operation results.

Management advisory services

Services designed to help clients improve their information systems or their business performance.

Stockholders

The owners of a corporation; also called shareholders

Accounting

The process by which financial information about a business is recorded, classified, summerized, interpreted, and communicated to owners, managers, and other interested parties.

Auditing

The review of finacial statements to assess their fairness and adherence to generally accepted accounting principles

International accounting

The study of accounting principles used by different countries.

Seperate entity assumption

the concept of keeping a firm's financial records seperate from the owner's personal financial records