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Accounting Principles Terms Chapters 1 & 2
Terms for Accounting 501 chapters 1 & 2 quiz
49
Accounting
Graduate
05/17/2011

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Term
Accounting
Definition
the information system that identifies, records, and communicates the economic events of an organization to interested users
Term
Assets
Definition
Resources a business owns
Term
Balance sheet
Definition
a financial statement that reports the assets, liabilities, and owner's equity at a specific date
Term
basic accounting equation
Definition
assets = liabilities + owner's equity
Term
Bookkeeping
Definition
a part of accounting that involves only the recording of economic events
Term
Corporation
Definition
a business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock
Term
cost principle
Definition
an accounting principle that states that companies should record assets at their cost
Term
drawings
Definition
withrdrawal of cash or other assets from an unincorporated business for the personal use of the owner(s)
Term
Economic entity assumption
Definition
an assumption that requires that the activities of the be kept separate and distinct from the activities of its owner and all other economic entities
Term
Ethics
Definition
The standards of conduct by which one's actions are judged as right or wrong, honest or dishonest, fair or not fair.
Term
Expanded accounting equation
Definition
Assets = Liabilities + Owner's Capital - Owner's Drawings + Revenues - Expenses
Term
Expenses
Definition
The cost of assets consumed or services used in the process of earning revenue
Term
Financial Accounting
Definition
the field of accounting that provides economic and financial information for investors, creditors and other external users
Term
Financial Accounting Standards Board (FASB)
Definition
A private organization that establishes generally accepted accounting principles (GAAP)
Term
Generally accepted accounting principles (GAAP)
Definition
Common standards that indicate how to report economic events
Term
Income statement
Definition
A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time
Term
International Accounting Standards Board (IASB)
Definition
An accounting standard-setting body that issues standards adopted by many countries outside the United States
Term
Investments by owner
Definition
The assets an owner puts into the business
Term
Liabilities
Definition
Creditor claims on total assets
Term
Managerial Accounting
Definition
The field of accounting that provides internal reports to help users make decisions about their companies
Term
Monetary unit assumption
Definition
An assumption stating that companies include in the accounting records only transaction data that can be expresed in terms of money
Term
Net Income
Definition
the amount by which revenues exceed expenses
Term
Net loss
Definition
The amount by which expenses exceed revenues
Term
Owner's equity
Definition
The ownership claim on total assets
Term
Owner's equity statement
Definition
A financial statement that summarizes the changes in owner's equity for a specific period of time
Term
Partnership
Definition
A business owned by two or more persons associated as partners
Term
Proprietorship
Definition
A business owned by one person
Term
Revenues
Definition
The gross increase in owner's equity resulting from business activities entered into for the purpose of earning income
Term
Sarbanes-Oxley Act of 2002 (SOX)
Definition
Law passed by Congress in 2002 intended to reduce unethical corporate behavior
Term
Securities and Exchange Commission (SEC)
Definition
A governmental agency that requires companies to file financial reports in accordance with generally accepted accounting principles
Term
Statement of cash flows
Definition
A financial statement that summarizes information about cash inflows (receipts) and cash outflows (payments) for a specific period of time
Term
Transactions
Definition
The economic events of a business that are recorded by accountants
Term
Account
Definition
A record of increases and decreases in specific asset, liability, or owner equity items
Term
Chart of accounts
Definition
A list of accounts and the account numbers that identify their location in the ledger
Term
Compound entry
Definition
A journal entry that involves three or more accounts
Term
Credit
Definition
the right side of an account
Term
Debit
Definition
the left side of an account
Term
Double-entry system
Definition
A system that records in appropriate accounts the dual effect of each transaction
Term
General journal
Definition
The most basic form of journal
Term
General Ledger
Definition
A ledger that contains all asset, liability, and owner's equity accounts
Term
Journal
Definition
An accounting record in which transactions are initially recorded in chronologial order
Term
Journalizing
Definition
The entering of transaction data in the journal
Term
Ledger
Definition
The entire group of accounts maintained by a company
Term
Normal balance
Definition
An account balance on the side where an increase in the account is recorded
Term
Posting
Definition
The procedure of transferring journal entries to the ledger accounts
Term
Simple entry
Definition
A journal entry that involves only two accounts
Term
T account
Definition
The basic form of an account
Term
Three-column form of account
Definition
A form with columns for debit, credit, and balance amoutns in an account
Term
Trial balance
Definition
A list of accounts and their balances at a given time
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