Accounting 280 - Ch. 1

Accounts Receivable

A claim against the customer. An account receivable is an asset, and the revenue is earned and recorded as if cash had been received.

Matching Concept

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

Balance Sheet

A list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or year. SPECIFIC DATE

Statement of Cash Flow

A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year. SPECIFIC PERIOD OF TIME

Statement of the Owner's Equity

A summary of the changes in the owner's equity that have occurred during a specific period of time such as a month or a year. SPECIFIC PERIOD OF TIME The statement of owner's equity is often viewed as the connecting link between the income statement and balance sheet.

Income Statement

A summary of the revenue and expenses for specific period of time, such as a month or year. SPECIFIC PERIOD OF TIME

Public Accounting

Accountants and their staff who provide services on a fee basis.

Auditors

Accountants who provide audit services. They verify the accuracy of financial records, accounts, and systems.

Securities and Exchange Commission (SEC),

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

Business Transaction

An economic event or condition that directly changes an entity's financial condition or its results of operations is a ? Ex. Paying a bill

Accounting Equation

Assets = Liabilities + Owner's Equity

Expenses

Assets used in this process of earning revenue are called ?Include: supplies used and payments for employee wages, utilities, and other services.

Limited Liability Corporation (LLC)

Combines the attributes of a partnership and a corporation.

Fees Earned

Different terms are used for the various types of revenues. As illustrated for NetSolutions, revenue from providing services is recorded as ?

Revenue

Earned money you received for rendering services to a customer.

Financial Accounting

External users of accounting information include investors, creditors, customers, and the government. These users are not directly involved in managing and operating the business. The area of accounting that provides external users with information is called this

Net Loss

If the expenses exceed the revenue, the excess is a ? A net loss decreases the owner's equity (capital) for the period.

Interest Revenue

Interest, which is recorded as ?

Managerial Accounting

Internal users of accounting information include managers and employees. These users are directly involved in managing and operating the business. The area of accounting that provides internal users with information is called this.

Prepaid Expenses

Items such as supplies that will be used in the business in the future are called ? They are assets.

Private Accounting

Managerial accountants employed by a business are employed in this

International Accounting Standards Board (IASB)

Many countries outside the United States use generally accepted accounting principles adopted by the

Corporation

Organization under state or federal statutes as a separate legal taxable entity.

Rent Revenue

Other examples of revenue include rent, which is recorded as ?

Proprietorship

Owned by one individual.

Partnership

Owned by two or more individuals.

Certified Public Accountants (CPAs)

Public accountants who have met a state's education, experience, and examination requirements may become

Sales

Revenue from the sale of merchandise is recorded as ?

Types of Businesses

Service businesses provide services rather than products to customers. Delta Air Lines (transportation services) The Walt Disney Company (entertainment services) Merchandising businesses sell products they purchase from other businesses to customers. Walmart (general merchandise) Amazon.com (Internet books, music, videos) Manufacturing businesses change basic inputs into products that are sold to customers. Ford Motor Co. (cars, trucks, vans) Dell Inc. (personal computers)

Financial Statements

The accounting reports providing this information are called ? The primary financial statements of a proprietorship are the income statement, the statement of owner's equity, the balance sheet, and the statement of cash flows. All financial statements are identified by the name of the business, the title of the statement, and the date or period of time.

Net Income, Net Profit, or Earnings.

The excess of the revenue over the expenses is called ? Net income for a period increases the owner's equity (capital) for the period.

Account Payable

The liability created by a purchase on account is called an ?

Profit

The objective of most businesses is to earn a profit. Profit is the difference between the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services.

Assets

The resources owned by a business are its ? Examples of these include cash, land, buildings, and equipment.

Liabilities

The rights of creditors are the debts of the business and are called

Owner's Equity

The rights of the owners are called The owner's equity is increased by amounts invested by the owner and is decreased by withdrawals by the owner. In addition, the owner's equity is increased by revenues and is decreased by expenses.

Financial Accounting Standards Board (FASB)

Within the United States, they have the primary responsibility for developing accounting principles.

Cost Concept

amounts are initially recorded in the accounting records at their cost or purchase price.

Accounting

an information system that provides reports to users about the economic activities and condition of a business. You could think of accounting as the "language of business."

Ethics

are moral principles that guide the conduct of individuals.

General-purpose financial statements

are one type of financial accounting report that is distributed to external users.

Generally Accepted Accounting Principles (GAAP)

financial accountants follow this when preparing reports. These reports allow investors and other users to compare one company to another.

Business

is an organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers.

The Business Entity Concept

limits the economic data in an accounting system to data related directly to the activities of the business. In other words, the business is viewed as an entity separate from its owners, creditors, or other businesses.

Unit of Measure Concept

requires that economic data be recorded in dollars.

Objectivity Concept

requires that the amounts recorded in the accounting records be based on objective evidence