an organization operated to earn a profit

a form of prganization with a single owner

the assumpton that a single, identifiable unit must be accounted for in all situations

Partnership

a businessowned by two or more individuals, the organization forn ofen used by accounting firms and law firms

Corporation

a form of entity organized under the laws of a paricular state, ownership evidenced by shares of stock

Share of Stock

a certificate that acts as evidence of ownership in a corporation

Bond

A certificate that represents a corporation's promise to repay a certain amount of money and interest in the future

Nonbusiness Entity

an organization operated for some purpose other than to earn a profit

Liability

an obligation of a business

Capital Stock

indicates the owner's contributions to a corporation

Stockholder

one of the owner's of a corporation (shareholder)

Creditor

someone to whom a company or person has a debt (lender)

Asset

a future economic benefit

Revenue

an inflow of assets resulting from the sale of goods and services

Accounting

the process of identifying, measuring and communicating economic information to various users

Expense

an outflow of assets resulting from the sale of goods and services

Management Accounting

the branch of accounting concerned with providing management with information to facilitate planning and control

Financial Accounting

the branch concerned with the preparation of financial statements for outsider use

Owner's Equity

owner's claims on the assets of an entity

Stockholder's Equity

owner's equity in a corporation (shareholder's equity)

Retained Earnings

the part of owner's equity that epresents the income earned less dividends paid over the life of an entity

Balance Sheet

financial statement that summarizes the assets, liabilities, and owner's equity at a specific point in time (statement of financial position)

Income Statement

a statement that summarizes revenues and expenses (statement of income)

Net Income

the excess of revenues over expenses (profits, earnings)

Dividends

distribution of net income of a business to it's owners

Statement of Retained Earnings

statement that summarizes the income, earned and dividends paid over the life of a business

Statement of Cash Flows

financial statement that summarizes a company's cash receipts and cash payments during theperiod rom operating, investing, and financing activities

Cost Priniciple

assets are recorded at the cost to acquire them (original cost or historical cost)

Going Concern

the assumption that an ntity is not in the process of liquidaion and that it will continue indefinately

Monetary Unit

yardstick used to measure amounts i financial statements; the dollar in the US

Time Period

an artificial segment on the calendar used as the basis for preparing financial statements

Generally Accepted Accounting Principles

GAAP

various methods, rules, practices and other procedures tht have eolved over time in response to the need to regulate the preparation of financial statements

Securities and Exchange Commission

SEC

the federal agency with ultimate authority to determine the rules for preparing statements for companies whose stock is sold to the public

Financial Accounting Standards Board

FASB

group in the private sector with authority to set accounting standards

American Institute of Certified Public Accountants

AICPA

professional organization of certified public accountant

Certified Public Accountant

CPA

the designation for an individual who has passed a uniform exam admiistered by the AICPA and has met other requirements as determined by individual states

Public Company Accounting Oversight Board

PCAOB

a five member body created by an ac of congress in 2002 toset auditing standards

International Accounting Standards Board

IASB

organization formed to develop worldwide accounting standards

Auditing

process of examining the financial statements and the underlying records of a company to render an opinion as to whether the statements are fairly presented

Sarbanes-Oxley Act

and act of congress in 2002 ntended to bring reform to corporate accountability an stewardship in the wake of a number of major corporate scandals

How to Find Retained Earnings

Beginning Retained Earnings + Net Income - Dividends =

End Retained Earnings

IMRSAD

Identification

Measurement

Reporting about

Scarce resources

Accruing to an entity

Decision making purposes

Basic Accounting Equation

Assets = Liability + Owner's Equity

Expanded Accounting Equation

Assets = Liability + Owner's Equity + Revenues - Expenses - Distribution

Matching Concept

1. Revenues are recognized when they are earned, not necessarily when they are recieved in cash, other property, or services (consideration)

2. Expenses are recognized (recorded) when they are incurred, not necessarily when they are paid in cash, other property of services

Liquidity

how quickly you can convert an asset to cash

Dividends

distribution of profits

Four Important Subtotals

-gross profit

- income from operations

-income before taxes

-net income