ACCOUNTING 215
Terms
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- creditor
- a person or entity to whom a company owes money
- expenses
- decreases in owner's equity that arise because a company delivers goods or services to customers
- paid-in capital
- the total capital investment in a corporation by its owners both at and subsequent to the inception of business
- transaction
- any event that both affects the financial position of an entityand that an accountant can reliably record in money terms
- retained income
- retained earnings
- Sarbanes-oxley act
- a law passed by the US congress in 2002 that gave the gov't a larger role in regulating the audit profession
- corporations that are publicly owned
- a corporation that sells shares in its ownership to the public
- multiple-step income statement
- an income statement that contains one or more subtotals that highlight significant relationships
- privately owned
- a corporation owned by a family, a small group of shareholders, or a single individual, in which shares of ownership are not publicly sold
- management accounting
- serves internal decision makers, such as top executives, department heads, college deans, hospital administrators and people at other management levels within the organization
- Form 10-K
- a document that US companies file annually with the Securites and Exchange Commission. It contains the companie's financial statements
- private accountants
- accountants who work for businesses, government agencies, and other nonprofit organizations
- inventory
- goods held by the company for the purpose of sales to customers
- partnership
- a form of organization that joins two or more individuals together as co-owners
- Form 8-k
- a significant intervening event in the fiscal period report
- sole proprietorship
- a busines with a single owner
- compound entry
- a transaction that affects more than two accounts
- generally accepted accounting principles (GAAP)
- the term that applies to all the broad concepts and detailed practices to be followed in preparing and distributing financial statments. it includes all the conventions, rules, and procedures that together comprise accepted accounting practice
- international accounting standards board (IASB)
- an international body established to deveop in the public interest, a single set of high-quality, understandable, and enforeable global accounting standards
- interim periods
- the time spans established for accounting purposes that are less than one year
- FASb statments
- name for the FASB's rulings on GAAp
- form 10-k
- annual fiscal period report
- cost of goods sold
- cost of sales, cost of revenue (aka). the original acquisition cost of the inventory that a company sells to customers during the reporting period
- board of directors
- a body elected by the shareholders to represent them. it is responsible for appointing and monitoring the managers
- accounting
- process of identifying, recording and summarizing economic information and reporting it to decision makers
- securities and exchange commission (SEC)
- the gov't agency charged by the US congress with the ultimate responsibility for autthorizing the GAAP for companies whose stock is held by the general investing public
- Limited Liability Company
- formed by one or more individuals or entities through a special written agreement. permitted to engage in any lawful, for profit business or activity other than banking or insurance
- accounts receivable
- also known as trade receivables , receivables. amounts owed to a company by customers as a result of the comany's delivering goods or services to them and extending credit in the ordinary course of business.
- annual report
- the most common source of financial information used by investors and others outside the company
- independent opinion
- auditor's opinion
- limited liability
- a feature of the corporate form of organization whereby corporate creditors (such as banks or suppliers) ordinarily have claims against the corporate assets only, not against eh personal assets of the owners
- hitorical (past) value
- since the intention is to use -- not sell - some assets, their past value is more objective than their current or future value
- stockholders' equity
- owners' equity of a corporation. the excess of assets over liabilities of a corporation
- financial accounting standards board
- the private sector body that is responsible for establishing GAAP in the United States
- balance sheet equation
- assets = liabilities + owner's equivty
- sales revenue
- (also known as sales or revenues) increases in owners equity arising from increases in assets received in exchange for the delivery of goods or services to customers
- account payable
- is a liability that results from a purchase of goods or services on open account
- operating cycle
- the time span during which a company uses cash to acquire goods and services, which in turn it sells to customers who in turn pay for their purchases with cash
- corporations
- business organizations created under state laws in the united states
- market value
- when an active market
- capital stock certificate
- formal evidence of wnership shares ina corporation
- financial accounting
- focuses on the specific needs of decisino makers external to the organization, such as stockholders, suppliers, banks and gov't agencies
- stock certification
- captical stock certificate
- income
- (also known as profits or earnings) the excess of revenues over expenses
- american institute of certified public accountants (AICPA)
- the pricipal professional associaion in the private sector that regulates the quality of the public accounting profession
- auditor's opinion
- a report describing the scope and results of an audit. companies include the opinion with the financial statements in their annual reports
- 4 assumptions for financial reporting
- 1. economic entity 2. fiscal period assumption 3. stable dollar assumption 4. going concern assumption
- fiscal year
- the year established for accounting purposes which may differe from a calendar year
- accounjt
- a summary record of the changes in a particular asset, liability, or owners' equity
- assets
- economic resourses that a company expects to help generate future cash inflows or help reduce future cash outflows
- net book value
- original cost less an allocation of the original cost to each period the item contributes to revenue (plant, eequipment, intangible assets)
- single step income statement
- income statement that groups all revenues and then lists and deducts all expenses without drawing any intermediate subtotals
- structure of a multiple-step income statment
- 1. start with separate computation and disclosure of gross profit 2. operating expenses 3. non-operating revenues and expenses
- balance sheet: account format
- assets are listed at the left
- Face (current) value (FV)
- approximates future value (cash, supplies
- balance sheet: report format
- assets are listed at the top
- cost of revenue
- cost of goods sold
- long lived asset
- an asset that a company expects to provide services for more than 1 year
- auditor
- a persron who examines the information used by managers to prepare the financial statements and attests to the credibility of those statements
- form 10-Q
- quarterly fiscalal period reqport
- retained earnings
- also known as retained income. total cumulative owners' equity generated by income or profits
- public accountants
- accountants who offer services to the general public on a fee basis, including auditing, tax work, and management consulting
- certified public accountant
- a person earns this designatino by meeting standards of both knowledge and integrety set by a State Board of Accountancy. only CPAs can issu official opinions on financial statements in the US
- balance sheet
- focuses on the financial pictures as of a given day. Also known as the statement of financial position. Has two counterbalancing section: left,(resources of the firm: everything the firm owns and controls from cash to builsing) and the right (the claims against the resources)
- open account
- buying or selling on credit, susually by just and authorized signature of the buyer
- audit
- an examination of a company's transations and the resulting financial statments
- cheif executive officer (CEo)
- the top manager in an organization
- entity
- an organization or a section of an organization that stands apart from other organizations and individuals as a separate economic unit
- cost of sales
- cost of revenue, cost of goods sold
- net realizable value
- face value less an estimate of uncollectibles (accounts and notes receivable)