Term
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Definition
| equals all revenues minus all expenses |
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Term
| separate entity assumption |
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Definition
| the firm's financial records and financial statements are completely separate from those of the firm's owners |
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Term
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Definition
| the items on the financial statements are measured in monetary units |
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Term
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Definition
| the life of a biz can be divided into meaningful time periods for financial reporting |
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Term
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Definition
| unless there is obvious evidence to the contrary, a firm is expected to continue operating in the foreseeable future |
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Term
| historical cost principle |
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Definition
| transactions are recorded at actual cost |
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Term
| revenue recognition principle |
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Definition
| revenue should be recognized when it is earned and collection is reasonably assured |
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Term
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Definition
| revenue that has been recorded so that it will show up on the income statement |
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Term
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Definition
| expenses should be recognized, shown on the income statement, in the same period as the revenue they helped generate |
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Term
| full disclosure principle |
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Definition
| the firm must disclose any circumstances and events that would make a difference to the users of the financial statements |
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Term
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Definition
| on credit, the expression applies to either buying or selling on credit |
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Term
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Definition
| amounts that a company owes its vendors, they are liabilities and are shown on the balance sheet |
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Term
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Definition
| the name for insurance a biz has purchased but not yet used, it's an asset |
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Term
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Definition
| amounts customers owe a company for goods/services purchased on credit |
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Term
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Definition
| to make changes in the accounting records, at the end of the period, just before the financial statements are prepared, to make sure the amounts are right |
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Term
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Definition
| a measure of how easily an asset can be converted to cash, the more liquid an asset is, the more easily it can be turned into cash |
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Term
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Definition
| assets the company plans to turn into cash or use to generate revenue in the next fiscal yr |
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Term
| noncurrent/long term assets |
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Definition
| assets that will last for more than a year |
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Term
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Definition
| liabilities the company will settle, pay off, in the next fiscal year |
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Term
| noncurrent/long term liabilities |
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Definition
| liabilities that will take longer than a year to settle |
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Term
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Definition
| shows a subtotal for many items, including current assets and current liabilities |
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Term
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Definition
| another name for contributed capital, the owner's investment in the biz |
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Term
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Definition
| refers to the way we recognize revenues and expenses. accountants don't rely on the exchange of cash to determine the timing of revenue recognition. firms recognize revenue when it's earned and expenses when they are incurred, no matter when the cash is receive or disbursed. accrual accounting following the matching principle |
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Term
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Definition
| transaction in which the revenue is earned or the expense is incurred before the exchange of cash |
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Term
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Definition
| transaction in which the exchange of cash takes place before the revenue is earned or the expense incurred |
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Term
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Definition
| system based on the exchange of cash. revenue is recognized only when cash is collected, and an expense is recognized only when cash is disbursed. this is not an acceptable method of accounting under GAAP |
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Term
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Definition
| a liquidity ratio that measure a firm's ability to meet its short-term obligations |
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Term
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Definition
| a company's policies and procedures designed to protect the assets of the firm and to ensure the accuracy and reliability of the accounting records |
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