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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)

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