Term
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Definition
| The form of balance sheet that resembles the basic format of the accounting equation, with assets on the left side and the liabilities and owner’s equity sections on the right side. |
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Definition
| The liability created by a purchase on account. |
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Definition
| A claim against the customer created by selling merchandise or services on credit. |
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Term
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Definition
| An information system that provides reports to stakeholders about the economic activities and condition of a business. |
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Term
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Definition
| Assets = Liabilities + Owner’s Equity |
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Term
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Definition
| The resources owned by a business. |
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Definition
| A list of the assets, liabilities, and owner’s equity as of a specific date, usually at the close of the last day of a month or a year. |
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Term
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Definition
| An organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers. |
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Term
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Definition
| A concept of accounting that limits the economic data in the accounting system to data related directly to the activities of the business. |
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Definition
| A person or entity who has an interest in the economic performance of a business. |
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Term
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Definition
| An economic event or condition that directly changes an entity’s financial condition or directly affects its results of operations. |
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Term
| Certified Management Accountant (CMA): |
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Definition
| A private accountant employed by companies, government, and not-for-profit entities, requiring a college degree, two years of experience, and successful completion of a two-day examination. |
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Term
| Certified Public Accountant (CPA): |
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Definition
| Public accountants who have met a state’s education, experience, and examination requirements. |
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Definition
| A business organized under state or federal statutes as a separate legal entity. |
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Definition
| A concept of accounting that determines the amount initially entered into the accounting records for purchases. |
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Definition
| Moral principles that guide the conduct of individuals. |
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Term
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Definition
| Assets used up or services consumed in the process of generating revenues. |
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Definition
| Revenue from providing services. |
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Term
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Definition
| The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records. |
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Term
| Financial Accounting Standards Board (FASB): |
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Definition
| The authoritative body that has the primary responsibility for developing accounting principles. |
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Term
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Definition
| Financial reports that summarize the effects of events on a business. |
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Term
| generally accepted accounting principles (GAAP): |
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Definition
| Generally accepted guidelines for the preparation of financial statements. |
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Term
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Definition
| A summary of the revenue and expenses for a specific period of time, such as a month or a year. |
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Term
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Definition
| Money received for interest. |
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Term
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Definition
| The rights of creditors that represent debts of the business. |
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Term
| limited liability company (LLC): |
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Definition
| A business form consisting of one or more persons or entities filing an operating agreement with a state to conduct business with limited liability to the owners, yet treated as a partnership for tax purposes. |
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Term
| management (or managerial) accounting: |
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Definition
| The branch of accounting that uses both historical and estimated data in providing information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies. |
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Term
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Definition
| A type of business that changes basic inputs into products that are sold to individual customers. |
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Term
| matching concept (or matching principle): |
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Definition
| A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses. |
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Term
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Definition
| A type of business that purchases products from other businesses and sells them to customers. |
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Term
| net income or net profit: |
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Definition
| The amount by which revenues exceed expenses. |
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Term
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Definition
| The amount by which expenses exceed revenues. |
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Term
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Definition
| A concept of accounting that requires accounting records and the data reported in financial statements be based on objective evidence. |
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Term
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Definition
| The owner’s right to the assets of the business. |
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Term
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Definition
| An unincorporated business form consisting of two or more persons conducting business as co-owners for profit. |
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Term
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Definition
| Items such as supplies that will be used in the business in the future. Also see deferred expenses. |
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Term
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Definition
| The field of accounting whereby accountants are employed by a business firm or a not-for-profit organization. |
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Term
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Definition
| The difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services. |
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Term
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Definition
| A business owned by one individual. |
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Term
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Definition
| The field of accounting where accountants and their staff provide services on a fee basis. |
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Term
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Definition
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Term
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Definition
| The form of balance sheet with the liabilities and owner’s equity sections presented below the assets section. |
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Term
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Definition
| Increases in owner’s equity as a result of selling services or products to customers. |
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Term
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Definition
| The total amount charged customers for merchandise sold, including cash sales and sales on account. |
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Term
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Definition
| A business providing services rather than products to customers. |
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Term
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Definition
| A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year. |
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Term
| statement of owner’s equity: |
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Definition
| A summary of the changes in owner’s equity that have occurred during a specific period of time, such as a month or a year. |
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Term
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Definition
| A concept of accounting requiring that economic data be recorded in dollars. |
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Term
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Definition
| an organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers. |
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Term
| A business's customers are... |
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Definition
| individuals or other businesses who purchase goods or services in exchange for money or other items of value. |
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Term
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Definition
| the difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services. |
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Term
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Definition
| provide services rather than products to customers. |
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Term
| Merchandising businesses... |
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Definition
| sell products they purchase from other businesses to customers. |
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Term
| Manufacturing businesses... |
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Definition
| change basic inputs into products that are sold to customers. |
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Term
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Definition
is owned by one individual and
* Comprises 70% of business organizations in the United States.
* Cost of organizing is low.
* Is limited to financial resources of the owner.
* Is used by small businesses. |
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Term
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Definition
similar to a proprietorship except that it is owned by two or more individuals and
* Comprises 10% of business organizations in the United States.
* Combines the skills and resources of more than one person. |
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Term
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Definition
organized under state or federal statutes as a separate legal taxable entity and
* Generates 90% of the total dollars or business receipts received.
* Comprises 20% of the business organizations in the United States.
* Includes ownership divided into shares of stock, sold to shareholders (stockholders).
* Is able to obtain large amounts of resources by issuing stock.
* Is used by large businesses. |
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Term
| A limited liability company (LLC) is... |
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Definition
organized as a corporation but can elect to be taxed as a partnership and
* Is a popular alternative to a partnership.
* Has tax and liability advantage to the owners. |
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Term
| Because of the large amount of resources required to operate a manufacturing business, most manufacturing businesses are... |
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Definition
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Term
| A business stakeholder is... |
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Definition
| a person or entity that has an interest in the economic performance and well-being of a business. |
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Term
| Capital market stakeholders provide... |
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Definition
| the major financing for the business in order for the business to begin and continue its operations. |
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Term
| Product or service market stakeholders include... |
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Definition
| customers who purchase the business's products or services as well as the vendors who supply inputs to the business. |
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Term
| Government stakeholders often provide... |
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Definition
incentives for businesses to locate in their jurisdictions.
The better a business does, the more taxes the government can collect. |
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Term
| Internal stakeholders include... |
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Definition
| individuals employed by the business. |
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Term
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Definition
| those individuals whom the owners have authorized to operate the business. |
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Term
| Managers are primarily evaluated on... |
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Definition
| the economic performance of the business. |
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Term
| Owners may offer managers ______ _________ that are tied directly to how well the business performs. |
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Definition
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Term
| The moral principles that guide the conduct of individuals are called... |
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Definition
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Term
| Capital market stakeholders - |
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Definition
| Providers of major financing for the business - Banks and owners |
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Term
| Product or service market stakeholders - |
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Definition
| Buyers of products or services and vendors to the business - Customers and suppliers |
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Term
| Government stakeholders - |
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Definition
| Collect taxes and fees from the business and its employees - Federal, state, and local governments |
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Term
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Definition
| Individuals employed by the business - Employees and managers |
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Term
| An ethical businessperson displays character by... |
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Definition
| embracing honesty, integrity, and fairness in the face of pressure to hide the truth. |
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Term
| By satisfying certain specific requirements, accountants may become certified as... |
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Definition
public accountants
(CPAs), management accountants (CMAs), or internal auditors (CIAs). |
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Term
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Definition
| the Sarbanes-Oxley Act of 2002 |
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Term
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Definition
| the Public Company Accounting Oversight Board (PCAOB). |
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Term
| the Sarbanes-Oxley Act of 2002 (SOX) established... |
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Definition
* an oversight body for the accounting profession called the Public Company Accounting Oversight Board (PCAOB).
* standards for independence, corporate responsibility, enhanced financial disclosures, and corporate accountability. |
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Term
| Accounting can be defined as... |
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Definition
| an information system that provides reports to stakeholders about the economic activities and condition of a business. |
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Term
| Financial analysts use accounting reports in... |
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Definition
| deciding whether to recommend the purchase of stock. |
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Term
| Banks use accounting reports in... |
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Definition
| determining the amount of credit to extend. |
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Term
| Suppliers use accounting reports in deciding... |
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Definition
| whether to offer credit for purchases of supplies and raw materials. |
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Term
| State and federal governments use accounting reports as... |
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Definition
| a basis for assessing taxes. |
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Term
| The process by which accounting provides information to business stakeholders is as follows. |
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Definition
| 1. Identify stakeholders. 2. Assess stakeholders' informational needs. 3. Design the accounting information system to meet stakeholders' needs. 4. Record economic data about business activities and events. 5. Prepare accounting reports for stakeholders. |
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Term
| Stakeholders use accounting reports as... |
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Definition
| a primary source of information on which they base their decisions. |
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Term
| The two most common specialized fields of accounting are... |
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Definition
| financial accounting and managerial accounting. |
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Term
| Financial accounting is primarily concerned with... |
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Definition
| the recording and reporting of economic data and activities for a business. |
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Term
| Managerial accounting, or management accounting, uses both financial accounting and estimated data to... |
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Definition
| aid management in running day-to-day operations and in planning future operations. |
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Term
| Management accountants gather and report information that is... |
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Definition
| relevant and timely to the decision-making needs of management. |
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Term
| Accountants employed by a business firm or a not-for-profit organization are said to be employed in... |
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Definition
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Term
| Accountants and their staff who provide services on a fee basis are said to be employed in... |
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Definition
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Term
| Individuals who provide audit services, called auditors, verify... |
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Definition
| the accuracy of financial records, accounts, and systems. |
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Term
| The Institute of Management Accountants (IMA) sponsors the... |
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Definition
| Certified Management Accountant (CMA) program. |
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Term
| The CMA certificate is... |
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Definition
| evidence of competence in management accounting. |
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Term
| Becoming a CMA requires... |
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Definition
| a college degree, two years of experience, and successful completion of a two-day examination. |
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Term
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Definition
| Accountants employed by companies, government, and not-for-profit entities. |
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Term
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Definition
| Accountants employed individually or within a public accounting firm in tax or audit services. |
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Term
| Public accountants who have met a state's education, experience, and examination requirements may become... |
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Definition
| Certified Public Accountants (CPAs). |
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Term
| The requirements for obtaining a CPA certificate differ among the various states: |
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Definition
* All states require a college education in accounting, and most states require 150 semester hours of college credit.
* In addition, a candidate must pass an examination prepared by the American Institute of Certified Public Accountants (AICPA). |
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Term
| Financial accountants follow _________ ________ __________ __________(GAAP) in preparing reports. |
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Definition
| generally accepted accounting principles |
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Term
| A standard set of generally accepted accounting principles allows for... |
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Definition
| the comparison of financial performance and condition across companies. |
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Term
| ___ _________ __________ _________ _____ (FASB) is the authoritative body having the primary responsibility for developing accounting principles. |
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Definition
| the Financial Accounting Standards Board |
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Term
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Definition
| Statements of Financial Accounting Standards as well as Interpretations of these Standards. |
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Term
| The Investor Protection, Auditor Reform, and Transparency Act of 2002, called the Sarbanes-Oxley Act, establishes... |
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Definition
| a Public Company Accounting Oversight Board to regulate the portion of the accounting profession that has public companies as clients. |
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Term
| the Investor Protection, Auditor Reform, and Transparency Act of 2002, called the Sarbanes-Oxley Act, prohibits... |
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Definition
| auditors (CPAs) from providing certain types of nonaudit services, such as investment banking or legal services, to their clients, prohibits employment of auditors by clients for one year after they last audited the client, and increases penalties for the reporting of misleading financial statements. |
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Term
| A ________ provides goods or services (outputs) to customers with the objective of maximizing profits. |
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Definition
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Term
| Service, merchandising, and manufacturing businesses may be organized as... |
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Definition
| proprietorships, partnerships, corporations, and limited liability companies. |
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Term
| A business stakeholder is... |
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Definition
| a person or entity (such as an owner, manager, employee, customer, creditor, or the government) who has an interest in the economic performance of the business. |
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Term
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Definition
| moral principles that guide the conduct of individuals. |
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Term
| Good ethical conduct depends upon... |
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Definition
| individual character, firm culture, and laws and enforcement. |
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Term
| Accounting, called the “language of business,” is... |
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Definition
| an information system that provides reports to stakeholders about the economic activities and condition of a business. |
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Term
| Accountants are engaged in _______ accounting or ______ accounting. |
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Definition
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Term
| _________ ________ __________ _________ (GAAP) are used in preparing financial statements so that stakeholders can compare one company to another. |
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Definition
| Generally accepted accounting principles |
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Term
| Accounting principles and concepts develop from... |
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Definition
| research, practice, and pronouncements of authoritative bodies such as the Financial Accounting Standards Board (FASB). |
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Term
| The business entity concept views the business as... |
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Definition
| an entity separate from its owners, creditors, or other stakeholders. |
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Term
| The cost concept requires... |
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Definition
| that properties and services bought by a business be recorded in terms of actual cost. |
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Term
| The objectivity concept requires... |
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Definition
| that the accounting records and reports be based upon objective evidence. |
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Term
| The unit of measure concept requires... |
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Definition
| that economic data be recorded in dollars. |
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Term
| The resources owned by a business and the rights or claims to these resources may be stated in the form of an equation, as follows: |
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Definition
| Assets = Liabilities + Owner’s Equity |
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Term
| All business transactions can be stated in terms of... |
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Definition
| the change in one or more of the three elements of the accounting equation. |
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Term
| The principal financial statements of a proprietorship are... |
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Definition
| the income statement, the statement of owner’s equity, the balance sheet, and the statement of cash flows. |
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Term
| The income statement reports... |
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Definition
| a period’s net income or net loss, which also appears on the statement of owner’s equity. |
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Term
| The ending owner’s capital reported on the statement of owner’s equity is also reported... |
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Definition
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Term
| The ending cash balance is reported on... |
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Definition
| the balance sheet and the statement of cash flows. |
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Term
| The business entity concept... |
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Definition
limits the economic data in the accounting system to data related directly to the activities of the business.
The business is viewed as an entity separate from its owners, creditors, or other stakeholders. |
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Term
| The objectivity concept requires... |
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Definition
| that the accounting records and reports be based upon objective evidence. |
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Term
| The unit of measure concept requires... |
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Definition
| that economic data be recorded in dollars. |
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Term
| The resources owned by a business are its... |
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Definition
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Term
| The rights of creditors represent... |
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Definition
| debts of the business and are called liabilities. |
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Term
| The rights of the owners are called... |
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Definition
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Term
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Definition
| Assets = Liabilities + Owner's Equity |
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Term
| Liabilities usually are shown before owner's equity in the accounting equation because... |
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Definition
| creditors have first rights to the assets. |
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Term
| An economic event or condition that directly changes an entity's financial condition or directly affects its results of operations is... |
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Definition
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Term
| All business transactions can be stated in terms of... |
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Definition
| changes in the elements of the accounting equation. |
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Term
| Under the business entity concept, ________ ______ and ________ ___________ are excluded from the equation. |
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Definition
| personal assets, personal liabilities |
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Term
| Items that will be used in the business in the future are called... |
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Definition
| prepaid expenses, which are assets. |
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Term
A business earns money by selling goods or services to its customers.
This amount is called... |
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Definition
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Term
| The receipt of cash increases assets and also increases... |
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Definition
| the owner's equity in the business. |
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Term
| Revenues are recorded in a separate column to the right of Owner Capital so that... |
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Definition
| the effects on owner's capital can be seen separately identified and summarized. |
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Term
| Revenue from providing services is called |
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Definition
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Term
Instead of requiring the payment of cash at the time services are provided or goods are sold, a business may accept payment at a later date.
Such revenues are called... |
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Definition
| fees on account or sales on account. |
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Term
| The amounts used in the process of earning revenue are called... |
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Definition
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Term
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Definition
| supplies used, wages of employees, and other assets and services used in operating the business. |
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Term
| Miscellaneous expenses include... |
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Definition
| small amounts paid for such items as postage, coffee, and magazine subscriptions. |
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Term
| The payment of an expense reduces... |
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Definition
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Term
| Paying an amount on account reduces... |
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Definition
| the amount owed on a liability. |
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