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Principles of Financial Accounting
Chapter 1
31
Accounting
Undergraduate 3
05/14/2013

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Term
Accounting
Definition
a system of maintaining records of a company's operations & communicating that information to decision makers
Term
Financial Accounting
Definition
are to measure business activities of a company & to communicate those measurements to external parties for decision-making purposes
Term
Creditors
Definition
make decisions related to lending money to the company
Term
Financing Activities
Definition
transactions involving external sources of funding (2 basics fundings-creditors & Owners)
Term
Investing Activities
Definition
includes purchases & sales of (1) long-term resources like land, buildings, equipment, & machinery and (2) any resources not directly related to a company's normal operations
Term
Operating Activities
Definition
includes transactions that relate to the primary operations of the company like utilities, taxes, advertising, wages, rent and maintenance
Term
Corporation
Definition
an entity that is legally separate from its owners (sells stocks of the company)
Term
Assets
Definition
resources owned by a company (cash, inventories, supplies, buildings)
Term
Liabilities
Definition
amounts owed to creditors
Term
Stockholders Equity
Definition
owners claims to resources
Term
Accounting Equation
Definition
Assets = Liabilities + Stockholders equity
Term
Revenues
Definition
are the amounts earned from selling products or services to customers
Term
Expenses
Definition
are the costs of providing products and services
Term
Net Income
Definition
the difference(whats left over) between revenues and expenses
Term
Net Loss
Definition
When the difference between revenue and expenses is negative
Term
Dividends
Definition
payments made to stockholders
Term
Sole Proprietorship
Definition
a business owned by one person
Term
Partnership
Definition
a business owned by two or more persons
Term
Financial Statements
Definition
periodic reports published by the company for the purpose of providing information to external users
Term
Income Statement
Definition
a financial statement that reports the companys revenues & expenses over an interval of time
Term
Retained Earnings
Definition
represents the cumulative amount of net income, earned over the life of the company, that has not been distributed to stockholders as dividends
Term
Balance Sheet
Definition
a financial statement that presents the financial position of the company on a particular date
Term
Statement Of Cash Flows
Definition
a financial statement that measures activities involving cash receipts & cash payments over an interval of time
Term
Management Discussion & Analysis (MD&A)
Definition
section typically includes management views on significant events, trends & uncertainties pertaining to the companys operations and resources
Term
Financial Accounting Standards Board (FASB)
Definition
an independent private-sector body with full time voting members & a very large support staff
Term
International Accounting Standards (IASB)
Definition
a accounting profession that has undertaken a project whose goal is to eliminate differences in accounting standards around the world
Term
Securities & Exchange Commission (SEC)
Definition
the 1934 act that requires companies that publicly trade their stock to prepare periodic financial statements for distribution to investors & creditors
Term
Auditor
Definition
someone hired by a company as an independent party to express a professional opinion of the accuracy of that companys financial statements
Term
Sarbanes-Oxley Act (SOX)
Definition
provides for the regulation of auditors & the types of services they furnish to clients, increases accountability of corporate executives, addresses conflicts of interest for securities analysts, and provides for stiff criminal penalties for violators
Term
Public Accounting
Definition
professional service firms that traditionally have focused on three ares; auditing, tax preparation/planning, & business consulting
Term
Private Accounting
Definition
means providing accounting services to the company that employs you
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