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Definition
| managers who plan organize and run a business |
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| an information system that IDENTIFIES MEASURES RECORDS AND COMMUNICATES the economic events of an organization to interested users |
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| investors, creditors, IRS, regulatory agencies, customers, labor unions, economic planners |
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Definition
| generally accepted accounting principles established by SEC and FASB |
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Term
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Definition
| gov agency that requires companies to file financial reports following GAAp |
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Definition
| private org. that establishes broad reporting standards and specific accounting rules |
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Definition
| assets should be recorded at their cost; value exchanged at time something is acquired (as opposed to market value) |
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Definition
only transactions that can be expressed in terms of money are to be included in the acc. records.
added assumption: unit of measure remains sufficiently constant over time |
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| Economic Entity Assumption |
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Definition
| the activities of the entity are to be kept separate and distinct from the activities of its owner and all other entities |
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Term
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Definition
business owned by one person, small amount of capital
unlimited liability |
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Definition
business owned by 2 or more people associated as partners
unlimited liability (responsible for partner's actions too) |
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Definition
| a business organized as a separate legal entity (provides protection limited liability) under state corporation law and having ownership divided into transferable shares of stock |
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Definition
resources owned by business
*cash
*accounts recievable
*supplies
*equipment |
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Term
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Definition
| claims to those to whom money is owed (creditors) existing debts and obligations |
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Definition
| claims of owners (what owners have invested in the company) Includes common stock, Retained Earnings, Dividends, Revenues, and Expenses |
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Term
| FASB objectives of financial reporting |
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Definition
provide info that is:
useful to those making investment and credit decisions
is helpful in assessing future cash flows
identifies the economic resources (assets), liabilities and the changes in those resources and claims |
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Term
| Qualitative characteristics of Acc info (4) |
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Definition
| relevance, reliability, comparability, consistency |
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Term
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Definition
| predictive value (helps forcast) or feedback value (confirms or corrects prior expectations) |
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Term
| FASB conceptual framework |
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Definition
1. Objectives of financial reporting
2. Qualitative characteristics of Accounting Info
3. Elements of Financial Statements
4. Operating Guidelines |
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Definition
| the economic life of a business can be divided into artificial time periods |
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Definition
| The enterprise will continue in operation long enough to carry out its existing objectives |
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Term
| Revenue Recognition Principle |
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Definition
| revenue should be recognized in the accounting period in which it is earned |
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| Matching Principle (expense Recognition) |
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Definition
Expenses are matched with revenues in the period in which efforts are made to generate revenues
Recognized when labor or product contributes to revenue |
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| Full disclosure Principle |
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Definition
| circumstances and events that make a difference to financial statement users should be disclosed |
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Term
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Definition
| current assets-current liabilities |
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Term
| profit margin percentage (and eqn) |
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Definition
percentage of each dollar ot sales that results in net income
net income/net sales |
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Term
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Definition
company's profitability
net income/total assets |
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| Return on Common Stockholder's equity |
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Definition
measures profitability from common stockholder's viewpoint
net income/ common equity
common equity=initial and subsequent investments |
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Definition
| measures enterprise's longevity |
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Term
| Debt to total assets ratio |
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Definition
total debt/total assets
higher ration = greater risk that the company may be unable to meet its maturity obligatoins
lower ratio= greater buffer available to creditors should the company become insolvent |
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Term
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Definition
| International Accounting Standards Board working toward development of a single set of high-quality global accounting standards for multinational corporations |
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Term
| debits cause increases in which accounts |
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Definition
| Expenses, Assets, Dividends |
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Term
| debits cause decreases in which accounts |
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Definition
| Retained Earnings, Revenues, liabilites, and common stock |
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Term
| elements of a general journal (4) |
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Definition
| transaction date, account titles and explainations, references, 2 amount columns (debit and credit) |
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Term
| Steps in the recording Process |
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Definition
1. Analyze each transaction for its effects on the accounts
2. Enter the transaction information in a journal (book of original entry)
3. Transfer the journal information to the appropriate accounts in the ledger (book of accounts) |
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Term
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Definition
| accounting time period begins on 1st day of month and ends 12 months later on the last day of the month |
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Term
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Definition
transaction that change a company's financial statements are recorded in the period in which the events occur
recognizes revenues when earned rather than when the cash is recieved |
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Term
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Definition
| revenue is recorded when cash is received |
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| Types of adjusting entries |
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Definition
| prepayments, accruals (revenues and expenses) |
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Term
| Formula for computing interest |
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Definition
| face value of note * annual interest rate *time in terms of 1 yr (1/12) = Interest |
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