Term
| What is the primary objective of financial accounting? |
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Definition
| serving external users by providing them with general-purpose financial statements |
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Term
| Principles of Accounting (4) |
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Definition
1. Measurement or Cost
2. Revenue Recognition
3. Expense Recogntion or Matching
4. Full Disclosure |
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Term
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Definition
| aka Cost principle, accounting information is based on actual cost. |
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Term
| Revenue Recognition Principle |
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Definition
| provides guidance on when a company must recognize (record) revenue. |
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Term
| Expense Recognition Principle |
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Definition
| aka matching principle prescribes that a company record the expenses it incurred to generate the revenue reported. |
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Term
| Full Disclosure Principle |
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Definition
| prescribes that a company report the details behind financial statements that would impact users decisions. |
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Term
| Assumptions of Accounting (4) |
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Definition
1. going-concern
2. monetary unit
3. time period
4. business entity |
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Term
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Definition
| accounting information reflects a presumption that the business will continue operating instead of being closed or sold. |
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Term
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Definition
| we can express transactions and events in monetary, or money, units. |
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Term
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Definition
| presumes that the life of a company can be divided into the periods, such as months and years, and that useful reports can be prepared for those periods. |
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Term
| Business Entity Assumption |
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Definition
| means that a business is accounted for separately from other business entities, including its owner. The reason for this assumption is that separate information about each business is necessary for good decisions. |
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Term
| 3 legal forms of business entity assumption |
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Definition
1. proprietorship
2. partnership
3. corporation |
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Term
| What is the group in the private sector responsible for U.S. GAAP? |
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Definition
| Financial Accounting Standards Board (FASB) |
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Term
| How does the accounting process begin? |
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Definition
| Identifying select transcations and events |
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Term
| What is a double entry accounting system? |
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Definition
1. at least two accounts are involved, with at least one debit and one credit.
2. the total amount debited must equal the total amount credited.
3. the accounting equation must not be violated. |
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Term
| What is the principle that requires that expenses be reported in the same period as the revenues that were earned as a result of the expense? |
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Definition
| Expense Recognition or Matching Principle |
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Term
| How and where do we INTIALLY record unearned revenue? |
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Definition
| credit to unearned revenue |
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Term
| Once we have made the required adjustments, what is the next trial balance referred to as? |
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Definition
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