Accounting 224

U.S Securities and Exchange Commission

SEC

Net Assets =

Stockholders Equity

Assets-Liabilities =

Stockholders Equity A=L+E

Managerial Accounting

The accounting activities carried out by a firm's accounting staff primarily to provide management with accounting data for decisions related to a firms operations,

Principle

The amount of money initially borrowed

Common Stock

The amount or percent that people have paid into the business.

Notes to the financial statements

The annual report section following the four financial statements that includes a description of the assumptions and estimates that were used in preparing the statements, the measurement procedures that were followed, and the details behind the summary numbers.

Financial Accounting

The area of accounting dealing with the preparation of financial statements showing a business's results of operations, financial position, and cash flow

Account

The basic component of an accounting system

Accounting

The process of measuring economic activity of an entity in monetary terms and communicating results to users.

10-K

The report filed annually with the U.S Securities and Exchange Commission by publicly held companies that reports the financial position and operating performance of the company

The accounting equation requires that:

Total asses equal total liabilities plus stockholders equity

Accrual Basis

Transactions are recorded based on when they happened. Not necessarily when they get the cash.

Sarbanes-Oxley Act

U.S legislation passed in 2002 to restore investor trust in U.S GAAP

Net Loss

When total expenses exceed sales revenue

Net Income (Net Earnings or Net Profit)

When total revenue exceeds total expenses

Corporation

a legal entity created under the laws of a state or the federal. Double taxation.

Financing Activities

a section in the statement of cash flows that reports cash flows associated with obtaining cash from owners and creditors, returning cash to owners, and repaying amounts borrowed.

Investing Activities

a section in the statement of cash flows that reports cash flows involving 1.The purchase and sale of plant assets and intangible assets 2.The purchase and sale of stocks, bonds, and other securities 3.The lending and subsequent collection of money

Accounting Cycle

a sequence of activities undertaken by accountants to accumulate and report the financial information of a business.

Expenses

are decreases in a company's resources from generating revenue.

Retained Earnings

are increased when operations produce net income and decreased when operations produce a net loss

Sales Revenue

are increases to a company's resources that result when goods or services are provided to customers.

Assets

are the economic resources of a business that can be expressed in monetary terms.

Liabilities

are the obligations or debts that a business must pay in cash or in goods

Advantage of Partnerships

broader skill set that multiple partners can bring to a business.

Management Discussion and Analysis (MD&A)

contains a managements' interpretation of the company's recent performance and financial condition.

New York Stock Exchange (NYSE)

exist to enable stockholders to readily buy and sell their ownership shares.

Triple Bottom Line

framework in which the single bottom line of financial performance is supplemented with a social bottom line and an environmental bottom line.

Debt Financing

involves borrowing money from sources such as a bank by signing a note payable or directly from investors by issuing bonds payable

Sole Proprietorship

is a business owned by one person; it is the most common of the three forms of business organization.

Balance Sheet

is a listing of a firms assets, liabilities, and stockholders equity as of a given date, usually the end of an accounting period.

Contributed Capital

is a measure of the capital contributed by the stockholders of a company when they purchase ownership shares in the company.

Earned Capital

is a measure of the capital that is earned by the company, reinvested in the business, and not distributed to its stockholders

T-account

is a simplified for of an account. T-accounts are so named because they resemble the letter "T".

Partnership

is a voluntary association of two or more persons for the purpose of conducting a business. Not a coporation.

Normal Balance

is the side on which increases to the account are recorded.

Stock Holders (Shareholders)

owners of a corporation that receive shares of stock as evidence of their ownership interest in the business

Stockholders Equity

refers to the ownership (stockholder) claims on the assets of the business.

Consistency

relates to a single item and means the same accounting methods are used from one accounting period to the next.

Statement of cash flows

reports a business's cash inflows and cash outflows during a given period of time

Statement of Stockholders Equity

reports the events causing an increase of decrease in a business's stockholders equity during a given time period, including both the changes in a company's common stock and changes in its retained earnings.

Income Statement

reports the results of operations for a business for a given time period, usually a quarter or a year.

Equity Financing

selling shares of stock to investors

Accounting Equation

states that the sum of a businesses economic resources must equal the sum of any claims on those resources.

Net Assets

stockholders equity

American Institute of Certified Public Accountants

(AICPA)

Institute of Management Accountants

(IMA)

Description of Corporation

-All types of owner control -Business taxed and owners taxed -Separate legal entity -Unlimited life

Description of Proprietorship

-One owner controlled -Business not taxed, but owner taxed -Not legal entity -Limited life

Description of Partnership

-Shared owner control -Business not taxed, but owners taxed -Not legal entity -Limited life

Changes in Equity =

...

Unearned Revenue (Deferred Revenue)

...

Order of Accounting

1. Income Statement 2. Changes in Equity 3. Balance Sheet 4. Cash Flow Statement

Forensic Accounting

A branch of accounting that involves investigations that result from actual or anticipated disputes such as criminal activity.

Which of the following is NOT a component of the annual report?

A company's charter of incorporation

Financial Accounting Standards Board (FASB)

A private, not-for-profit organization whose task is to develop generally accepted accounting principles in the United States.

Certified Public Accountants (CPA)

A professional designation given to an accountant who has fulfilled stringent licensing requirements

Public Company Accounting Oversight Board (PCAOB)

A quasi-governmental agency established by the Sarbanes-Oxley Act to overhaul auditing standards, inspect the work of accounting firms, and discipline independent auditors that fail to meet and maintain acceptable standards of audit performance.

Annual Report

A report filed with the U.S Securities and exchange Commission by publicly held companies that reports the financial position and operating performance of the company. A less detailed version is mailed to the company's stockholders.

Operating Activities

A section in the statement of cash flows that reports cash flows from all activities that are not classified as investing or financing activities.

Generally Accepted Accounting Principles (GAAP)

A set of accounting standards that form the guidelines for financial accounting.

International Accounting Standards Board (ISAB)

An independent accounting standard-setting agency whose purpose is to develop international financial accounting standards

International Financial Reporting Standards (IFRS)

An international set of accounting standards, interpretations, and the framework for the preparation and presentation of financial statements used in many countries.

Account Equation

Assets= Liabilities + Stockholders Equity A=L+E

Cash Flow Statement =

Cash from Operating Activities Investing Financing

All Corporations must have _______ stock

Common Stock

Equity can be calculated by adding ______ plus _______ earnings.

Common Stock, Retained Earnings

Stockholders Equity =

Common stock and Retained Earnings

Advantage of Sole Proprietorship

Ease of formation

Beginning Retained Earnings + Net Income - Dividends =

Ending Retained Earnings=

Creditors

Financial institutions that lend money to companies

The sale of stock in a business is an example of what type of business activity?

Financing

The three types of business activities undertaken by all enterprises are:

Financing, investing, and operating.

Generally Accepted Auditing Standards

GAAS

A primary qualitative characteristic of accounting information is relevance. Relevance means that information should:

Have the capacity to make a difference in a decision

Which of the following represents a key financial statement linkage?

None of these represents a key financial statement linkage

The materiality concept is best described as:

Only events large enough to matter need be disclosed in the financial statements.

A higher ratio of liabilities to stockholders equity implies that a business is:

Principally debt financed

The cost principle is best described as:

Recording an asset on the balance sheet at an amount equal to what was paid for it.