Accounting -Chapter 1

Limited Liability Company

A business form consisting of one or more persons or entities filing an operating agreement with a state To conduct business with limited liability to the owners, yet treated as a partnership for tax purposes

Corporation

A business organized under state or federal status as a separate legal entity

Proprietorship

A business owned by one person

Service Business

A business providing services rather than products to customers

Account Receivable

A claim against the customer created by selling merchandise or services on credit

Ratio Of Liabilities to owner's (stockholders') equity

A comprehensive leverage ratio that measures the relationship to the claims of creditors to stockholder's equity

Cost Concept

A concept of Accounting that determines the amount initially entered into the accounting records for purchase

Business Entity Concept

A concept of Accounting that limits the economic data in the accounting system to data related directly to the activities of the business

Matching concept

A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses

Unit of measure concept

A concept of accounting requiring that economic data be recorded in dollars

Objectivity Concept

A concept of accounting that requires accounting records and the data reported in financial statements to be based on objectives evidence

Balance sheet

A list of the assets, liabilities and owner's equity as of a specific date, usually as the dose of the last day of the month or a year

Statement Of cash flows

A summary of the cash receipts and cash payments for a specific period of time such as a month or a year

Statement of Owner's Equity

A summary of the changes in owners equity that have occurred during a specific period of time

Manufacturing Business

A type of business that changes basic inputs into products that are sold to individual customers

Merchandising business

A type of business that purchase products from other businesses and sells them to customers

securities and exchange commission

An agency of the U.S government that has authority over the accounting and financial disclosures for companies whose shares of ownership (stock) are sold and traded to the public

Business transaction

An economic event Or condition that directly changes an entity's financial condition or directly Affects its results of operations

Accounting

An information system that provides ueports to stakeholders about the economic activities and condition of a business

Business

An organization in which basic resources (inputs) such as materials and labor, are assembled and Processed to provide goods or services (outputs) to customers

Partnership

An unincorporated business form consisting Of two or more persons conducting business as co-owners for profits

Accounting Equation

Assets = Liabilities + Owners Equity

Expenses

Assets used up or services consumed in the Process of generating revenues

Revenue

Increases an owner's equity as a result of selling services or products to customers

Prepaid Expense

Items such as supplies that will be used in the businessin the future

Rent revenue

Money received for rent

Ethics

Moral principles that guide the conduct of individuals

Certified Public Accountant

Public Accountants who have met a state's education, experience, and examination requirements

Fees Earned

Revenue from providing services

Net loss

The amount by which expenses exceed revenue

Earnings

The amount by which revenues exceed expenses

Net Income (net profit)

The amount by which revenues exceed expenses

Financial Accounting Standards Board

The authoritative body that has the primary responsibility for developing accounting principles

Financial Accounting

The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a parodic preparation of various statements from such records

Management (Managerial) accounting

The branch of accounting that uses both historical and estimated data win providing information that management uses in conducting daily operations an planing future operations and win developing overall business starategies

Profit

The difference between the amounts received from the customers for goods or services provided and the amounts paid for the inputs Used to provide the goods or services

Public Accounting

The field of accounting where accountants and their staff provide services on a fce basis

Account Payable

The liability created by a purchase on account

Assets

The resources owned by a business

Liabilities

The rights of creditors that represent debts of the business

Sales

The total amount charged customers for merchandise sold, including cash sales and sales on account

Private Accounting

the field of accounting whereby accountants are employed by a business firm or a not-for-profit organization

Account Form

the form of balance sheet that resembles the basic format of the accounting equation,with assets on the left side and liabilities and Owners equity on the right side