Financial Accounting Fundamentals Chapter 1 – Flashcards
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information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information
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accounting
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identifying, recording, and communicating
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accounting activities
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recording transactions and events
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record keeping
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the language of business
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what is accounting referred to as?
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lenders, shareholders, governments, consumer groups, external auditors, customers
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external users
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officers, managers, internal auditors, sales staff, budget officers, controllers
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internal users
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General Accepted Accounting Principles (relevant, reliable, and comparable)
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GAAP
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cost principle, revenue recognition principle, matching principle, full disclosure principle
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accounting principles
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accounting info is based on actual cost
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cost principle
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when company must recognize revenue
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revenue recognition principle
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company must record its expenses incurred to generate revenue
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matching principle
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report details behind financial statement that would impact users decisions
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full disclosure principle
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accounting equation
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assets = liabilities + equity
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expanded accounting equation
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assets = liabilities + [common stock - dividends + revenues - expenses]
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going- concern, monetary unit, time period, business entity
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accounting assumptions
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reflects presumption that business will continue operating
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going concern assumption
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express transactions and events in monetary units
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monetary unit assumption
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life of company can be divided into time periods
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time period assumption
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business is accounted for separately from other business entities
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business entity assumption
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business owned by one person
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proprietorship
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resources with future benefits
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assets
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what a company owes
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liability
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claims of its owners
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equity
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sets broad and specific principles
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financial accounting standards board (FASB)
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establishes reporting requirements
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securities and exchange commission (SEC)
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identified preferred accounting practices
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internal accounting standards board (IASB)
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income statement, statement of retained earnings, balance sheet, statement of cash flows
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financial statements
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revenues - expenses = net income
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income statement
