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Acct. Chap 1 Definitions
Defining words in accounting
47
Accounting
Undergraduate 2
08/21/2012

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Term
Statement of cash flows
Definition
identifies cash inflows(receipts) and cash outflows(payments) over a period of time.
Term
Balance Sheet
Definition
describes a company's financial position(assets, equity, liabilities) at a point in time
Term
Statement of retained earnings
Definition
explains changes in retained earnings from net income or net loss and from any dividends over a period of time.
Term
Income Statement
Definition
describes a company's revenues and expenses along with the resulting net income or loss over a period of time due to earnings activities.
Term
Events
Definition
Happenings that affect the accounting equation and are reliably measured.
Term
Internal Transactions
Definition
exchanges within an entity, which may or may not affect the accounting equation.
Term
External Transactions
Definition
exchanges of value between two entities.
Term
Net Income
Definition
When revenue exceeds expenses. It increases equity.
Term
Expenses
Definition
decrease retained earnings and are the cost of assets or services used to earn revenues.
Term
Dividends
Definition
The distribution of assets to stockholders.
Term
Retained earnings
Definition
income that has not been distributed to its stockholders.
Term
Contributed Capital
Definition
the amount that stockholders invest in the company.
Term
Equity
Definition
The owners claim on assets
Term
Liabilities
Definition
Creditors' claims on assets
Term
Assets
Definition
resources a company owns or controls
Term
Sarbanes-Oxley Act (SOX)
Definition
An act created to help curb financial abuses at companies that issue their stock to the public. It regulates analust conflicts, imposes corporate government requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws.
Term
Cost-benefit constraint
Definition
Only information with benefits of disclosure greater than the costs of providing the information need to be disclosed.
Term
Materiality constraint
Definition
Only information that would influence the decisions of a reasonable person need to be disclosed.
Term
Common Stock/ Capital Stock
Definition
When a corporation only issues one class of stocks.
Term
Shares/ Stocks
Definition
Units to gauge the division of ownership of a corporation among its multiple owners.
Term
Shareholders/ stockholders
Definition
Owners of a corporation.
Term
Corporation(C corporation)
Definition
a business legally separate from its owner or owners, meaning it is responsible for its own acts and its own debts
Term
Partnership
Definition
a business owned by two or more people, called partners, which are jointly liable for tax and other obligations.
Term
Sole Proprietorship
Definition
a business owned by one person in which that person and the company are viewed as one entity for tax and liability purposes.
Term
Business Entity Assumption
Definition
A business owned by one person in which that person and the company are viewed as one entity for tax and liability purposes.
Term
Time Period Assumption
Definition
Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.
Term
Monetary Unit Assumption
Definition
One can express transactions and events in monetary units
Term
Going-Concern Assumption
Definition
accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
Term
Full disclosure principle
Definition
A company must report the details behind financial statements that would impact users' decisions
Term
Expense Recognition(Matching) Principle
Definition
a company must record the expenses it incurred to generate the revenue reported.
Term
Revenue Recognition Principle
Definition
sets standard to when a company must record revenue.
Term
The Measurement(cost) Principle
Definition
accounting information is based on actual cost
Term
International Financial Reporting Standards(IFRS)
Definition
International standards that identify preferred accounting practices
Term
Generally accepted accounting principles(GAAP)
Definition
Principles used to govern financial accounting practices
Term
Ethics
Definition
beliefs that distinguish right from wrong. Accepted standards of good and bad behavior.
Term
Internal Users
Definition
users of accounting information who are directly involved in managing and operating an organization.
Term
Managerial Accounting
Definition
the area of accounting that serves the decision making needs of internal users.
Term
Financial Accounting
Definition
the area of accounting aimed at serving external users by providing them with general-purpose financial statements.
Term
External Users
Definition
users of accounting who are not directly involved in running the organization.
Term
Record-keeping/ Bookkeeping
Definition
the recording of transactions and events, either manually or electronically.
Term
Accounting
Definition
an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization.
Term
The Securities and Exchange Commission
Definition
Body with legal rights to set Generally Accepted Accounting Principles(GAAP)
Term
International Financial Reporting Standards(IFRS)
Definition
International standards that identify preferred accounting practices
Term
Audit
Definition
An examination of an organization's accounting system and records that adds credibility to financial statements.
Term
Investing Activities
Definition
The acquiring and disposing of assets that an organization uses in its business.
Term
Financing Activities
Definition
Provide the monies needed to pay for resources such as land and buildings.
Term
Transaction
Definition
an event that affects the financial position of a particular activity.
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