Accounting chapter 2

additional paid-in capital

The excess of the amt received from the sale of stock over the par value of the shares sold.

depreciation expense

The expense recognized in a fiscal period for the depreciation of an asset.

Depreciation

the accounting process of recognizing the cost of an asset that is used up over its useful life to the entity.

subsidiary

A corp whose stock is more than 50 percent owned by another corp

accrual accounting

Accounting that recognizes revenues and expenses as they occur, even though the cash receipt from the revenue or the cash disbursement related to the expense may occur before or after the event that causes revenue or expense recognition.

Gains

Increases in net assets from incidental transactions that are not revenues or investments by owners.

revenues

Inflows of cash or increases in other assets, or the settlement of liabilities during a period, from delivering or producing goods, rendering services, or performing other activities that constitute the entity's major operations.

statement of changes in capital stock

The financial statement that summarizes changes during a fiscal period in capital stock and additional paid-in-capital. This info may be included in the statement of changes in owner's equity.

income from operations

The difference between gross profit and operating expenses. AKA operating income.

owner's equity

The equity of the entity's owners in the assets of the entity. Sometimes referred to as net assets; the difference between assets and liabilities.

stock

The evidence of ownership of a corporation.

net income

The excess of revenues and gains over expenses and losses for a fiscal period.

profit

The excess of revenues and gains over expenses and losses for a fiscal period. AKA net income.

statement of cash flows

The financial statement that explains why cash changed during a fiscal period. Cash flows from operating, investing, and financing activities are shown.

balance sheet

The financial statement that is a listing of the entity's assets, liabilities, and owner's equity at a point in time. Sometimes this statement is called the statement of financial position.

dividend

A distribution of earnings to the owners of a corp.

Corporation

A form of org in which ownership is evidenced by shares of stock owned by stockholders; its features, such as limited liability of the stockholders, make this the principal form of org for most business activity.

proprietorship

A form of org indicating individual ownership without the limited liability and other features of a corporation.

partnership

A form of org indicating ownership by two or more individuals or corporations without the limited liability and other features of a corporation.

accounts payable

A liability representing an amt payable to another entity, usually b/c of the purchase of merchandise or services on credit.

going concern concept

A presumption that the entity will continue in existence for the indefinite future.

account

A record in which transactions affecting individual assets, liabilities, owners' equity, revenues and expenses are recorded.

accrued liabilities

Amounts that are owed by an entity on the balance sheet date.

par value

An arbitrary value assigned to a share of stock when the corp is organized. Sometimes used to refer to the stated value or face amount of a security.

Cash

An asset on the balance sheet that represents the amt of cash on hand and balances in bank accounts maintained by the entity.

accounts receivable

An asset representing a claim against another entity, usually arising from selling goods or services on credit

opportunity cost

An eco concept relating to income forgone because an opportunity to earn income was not pursued.

profit and loss statement

Another term for income statement

statement of operations

Another term for income statement

net worth

Another term for net assets or owner's equity, but not as appropriate because net worth might be misleading.

statement of financial position

Another term for the balance sheet; a listing of the entity's assets , liabilities, and owner's equity at a point in time.

statement of earnings

Another term for the income statement; it shows revenues, expenses, gains, and losses for a period of time and thereby the entity's results of operations for a period of time.

accounting equation

Assets = liabilities + owners' equity. Equals out. The fundamental relationship represented by the balance sheet and the foundation of the bookkeeping process. Another term is balance sheet equation.

current assets

Cash and those assets that are likely to be converted to cash or used to benefit the entity within one year of the balance sheet date.

statement of changes in retained earnings

Changes during a fiscal period in retained earnings. This info may be included in the statement of changes in owner's equity.

COGS

Cost of merchandise sold during the period; an expense deducted from net sales to arrive at gross profit. A frequently used synonym for cost of sales.

retained earnings

Cumulative net income that has not been distributed to the owners of a corp as dividends.

losses

Decreases in net assets from incidental transactions that are not expenses or distributions to owners.

transactions

Eco interchanges between entities that are accounted for and reflected in financial statements

matching concept

Expenses incurred in generating revenues should be deducted from revenues earned during the period for which results are being reported.

net sales

Gross sales, less sales discounts and sales returns and allowances.

merchandise inventory

Items held by an entity for sale to customers in the normal course of business.

earnings per share of common stock outstanding

Net income available to the common stockholders divided by the average number of shares of common stock outstanding during the period . Usually referred to simply as EPS

gross profit

Net sales less cost of goods sold. AKA gross margin

expenses

Outflows or other using up of assets or incurring a liability during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's major operations.

assets

Probable future eco benefits obtained or controlled by an entity as a result of past transactions or events.

Liabilities

Probable future sacrifices of eco benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.

paid-in-capital

The amt invested in the entity by the owners.

fiscal year

The annual period used for reporting to owners.

Common stock

The class of stock that represents residual ownership of the corp.

net assets

The difference between assets and liabilities. AKA owner's equity

statement of changes in owner's equity

The financial statement that summarizes the changes during a fiscal period in capital stock, additional paid-in capital, retained earnings, and other elements of owner's equity.

income statement

The financial statement that summarizes the entity's revenues, expenses, gains and losses for a period of time and thereby reports the entity's results of operations for that period of time.

stockholders

The owners of a corp's stock; sometimes called shareholders.

equity

The ownership right associated with an asset. See owner's equity

accumulated depreciation

The sum of the depreciation expense that has been recognized over time. It is a contra asset- an amount that is subtracted from the cost of the related asset on the balance sheet.

current liabilities

Those liabilities due to be paid within one year of the balance sheet date.