Information and measurement system that identifies, records,

and communicates relevant information about a company’s business

activities. (p. 4)

Equality involving a company’s assets, liabilities,

and equity; Assets 5 Liabilities 1 Equity; also called balance sheet

equation. (p. 14)

Resources a business owns or controls that are expected to provide

current and future benefits to the business. (p. 14)

Analysis and report of an organization’s accounting system, its

records, and its reports using various tests. (p. 12)

Individuals hired to review financial reports and information

systems. Internal auditors of a company are employed to assess and

evaluate its system of internal controls, including the resulting reports.

External auditors are independent of a company and are hired to assess

and evaluate the “fairness” of financial statements (or to perform other

contracted financial services) (p. 13).

Financial statement that lists types and dollar amounts of

assets, liabilities, and equity at a specific date. (p. 19)

Part of accounting that involves recording transactions

and events, either manually or electronically; also called bookkeeping.

(p. 4)

Principle that requires a business to be

accounted for separately from its owner(s) and from any other

entity. (p. 11)

Corporation’s basic ownership share; also generically

called capital stock. (pp. 12 & 510)

A written framework to guide the development,

preparation, and interpretation of financial accounting information. (p. 9)

Business that is a separate legal entity under state or

federal laws with owners called shareholders or stockholders.

(pp. 12 & 508)

Notion that only information with benefits of

disclosure greater than the costs of disclosure need be disclosed. (p. 12)

Accounting principle that prescribes financial statement

information to be based on actual costs incurred in business transactions.

(p. 10)

Owner’s claim on the assets of a business; equals the residual

interest in an entity’s assets after deducting liabilities; also called net assets.

(p. 14)

Codes of conduct by which actions are judged as right or wrong,

fair or unfair, honest or dishonest. (pp. 8 & 736)

Happenings that both affect an organization’s financial position

and can be reliably measured. (p. 15)

Assets = Liabilities + Equity

Equity= [Owner capital - Owner withdrawals + Revenues - Expenses]for a noncorporation (p. 14)

Persons using accounting information who are not directly

involved in running the organization. (p. 5)

Principle that prescribes financial statements

(including notes) to report all relevant information about an entity’s operations and financial condition. (p. 11)

Principle that prescribes financial statements

to reflect the assumption that the business will continue operating. (p. 11)

Persons using accounting information who are directly

involved in managing the organization. (p. 6)

Creditors’ claims on an organization’s assets; involves a

probable future payment of assets, products, or services that a company is obligated to make due to past transactions or events. (p. 14)

Area of accounting aimed mainly at serving the decision-making needs of internal users; also called management accounting.

(pp. 6 & 732)

Prescribes expenses to be reported in the same period as the revenues that were earned as a result

of the expenses. (pp. 11 & 364)

Prescribes that accounting for items that significantly

impact financial statement and any inferences from them adhere strictly to GAAP. (pp. 12 & 364)

Accounting information is based on cost with potential

subsequent adjustments to fair value; see also cost principle. (p. 10)

Principle that assumes transactions and

events can be expressed in money units. (p. 11)

Amount earned after subtracting all expenses necessary for and matched with sales for a period; also called income, profit, or earnings.

(p. 14)

Account showing the owner’s claim on company assets;

equals owner investments plus net income (or less net losses) minus owner withdrawals since the company’s inception; also referred to as equity. (p. 14)

Account used to record asset distributions to the

owner. (See also withdrawals.) (p. 14)

Business owned by one person that is not organized

as a corporation

Part of accounting that involves recording transactions

and events, either manually or electronically; also called bookkeeping.

(p. 4)

Monies received from an investment; often in percent form.

(p. 26)

Ratio reflecting operating efficiency; defined as

net income divided by average total assets for the period

The principle prescribing that revenue

is recognized when earned. (p. 10)

Owners of a corporation; also called stockholders.

(p. 12)

Business owned by one person that is not organized

as a corporation

A financial statement that lists cash inflows

(receipts) and cash outflows (payments) during a period; arranged by operating, investing, and financing. (pp. 19 & 632)

Payment of cash or other assets from a proprietorship or

partnership to its owner or owners. (p. 14)