accounting- chapter 1

revenues

-the gross increases in stockholders' equity from engaging in business activities entered into for the purpose of earning income

income statement

A financial statement showing the revenue and expenses showing net income or net loss for a fiscal period.

sabarnes-oxley act (SOX)

A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate.

international accounting standards board (IASB)

Accounting standards and practices adapted by many countries outside the United States

international financial reporting standards (IFRS)

International Financial Reporting Standards issued by the International Accounting Standards Board.

historical cost principle

Principle that states that assets and services should be recorded at their actual cost.

corporation

a business organized as a separate legal entity under state corporation laws, where ownership is divided into transferable shares of stock

partnership

a business owned by 2+ persons associated as partners

statement of cash flow

a finical statement that summarizes information about the cash inflows (receipts) and the cash outflows (payments) for a specific period of time

bookkeeping

a part of accounting that involves only the recording of economic events

finical accounting standards board (FASB)

a private organization, that establishes generally accepted accounting principles in the US (GAAP)

fair value principle

an accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell the asset or settle a liability)

monetary unity assumption

an assumption that requires that only those things that can be expressed in money are included in the accounting records

securities and exchange commission (SEC)

an independent agency of the government that regulates financial markets and investment companies

external users

are individuals and organizations outside of the company who wants finical information about the company

expanded accounting equation

assets= liabilities + owner's capital -owner's drawings +revenue -expenses

basic accounting equation

assets= liabilities + owner's equity

economic entity assumption

assumption that requires that the activities of the entity be kept separate and distant from the activities of its owner and all other economic entities

generally accepter accounting principles (GAAP)

common standards that indicate how to report economic events

liabilities

creditor claims against total assets

relevance

financial info that is capable of making a difference in a decision

balance sheet

finical statement that reports the assets, liabilities and owners equity at a specific date

owner's equity statement

finical statement that summarizes the changes in owner's equity for a specific time period

accounting

information system that identifies, records and communicates the economic events of an organization to interested users

internal users

managers who plan, organize and run the business

faithful representation

numbers and descriptions match what really existed or happened- factual records

assets

resources a business own

net loss

the amount by which expenses exceed revenues

net income

the amount by which revenues exceed expenses

investments by owner

the assets an owner puts into the business

expenses

the cost of assets consumed or services used in the process of earning revenue

transactions

the economic events of a business that are recorded by accountants

managerial accounting

the field of accounting that provides internal reports to help users make decisions about their companies

financial accounting

the field of accounting that provides the economic and financial information for investors and creditors and other external users

owner's equity

the ownership claim on total assets

convergence

the process of reducing the differences between U.S. GAAP and IFRS

ethics

the standards of conduct by which one's actions are judged as right or wrong, honest or dishonest and fair or unfair

drawings

withdraw of cash or other assets from an unincorporated business for the personal use of the owner