Chapter 1

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 persons who carry on a business for profit and who are legally responsible for the debts and taxes of the business

Economic Entity

A business or organization whose major purpose is to produce a profit for it's owners.

Social Entity

A nonprofit organization, 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 the financial Accounting Standards board.

Corporation

A publicly or privately owned business entity that is separate from it's 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 Standards Board

Generally Accepted Accounting Principles (GAAP)

Accounting standards developed and applied by professional accountants

Managerial Accounting

Accounting work carried on by an accountant employed by a single business in industry; the branch of accounting that provides financial information about business segments, activities, or products

Governmental Accounting

Accounting work preformed for a federal, state, or local governmental unit

Discussion Memorandum

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

Certified Public Accountant (CPA)

An independent accountant who provides accounting services to the public for a fee

Entity

Anything having it's own separate identity, such as an individual, a town, a university, or a business.

Stock

Certificates that represent ownership of a corporation

Accounting Standards Update

Changes to Accounting Standards Codification are communicated through Accounting Standards Update covering approximately 90 topics.

Public Accountants

Members of firms that perform accounting services for other companies

Management Advisory Services

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

Separate Entity Assumption

The concept that a business is separate from it's owners; the concept of keeping a firm's financial records separate from it's owner's personal financial records

Stockholders

The owners of a corporation, also called shareholders

Accounting

The process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owner's managers, and other interested parties

Auditing

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

Accounting standards certification

The source of authoritative U.S GAAP

International Accounting

The study of accounting principles used by different countries