Chapter 1 (Horngren’s Accounting 11th edition) – Flashcards
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Accounting
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The information system that measures business activities, processes the information into reports, and communicates the results to decision makers.
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Financial Accounting
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The field of accounting that focuses on providing information for external decision makers.
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Managerial Accounting
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The field of accounting that focuses on providing information for internal decision makers.
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Certified Management Accountants (CMAs)
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Certified professionals who specialize in accounting and financial management knowledge. They typically work for a single company.
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Certified Public Accountants (CPAs)
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Licensed professional accountants who serve the general public.
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Creditor
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Any person or business to whom a business owes money.
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Corporation
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A business organized under state law that is a separate legal entity.
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Economic Entity Assumption
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An organization that stands apart as a separate economic unit.
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Financial Accounting Standards Board (FASB)
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The private organization that oversees the creation and governance of accounting standards in the United States.
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Generally Accepted Accounting Principles (GAAP)
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Accounting guidelines, currently formulated by the Financial Accounting Standards Board (FASB); the main U.S. accounting rule book.
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Limited-Liability Company (LLC)
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A company in which each member is only liable for his or her own actions.
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Partnership
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A business with two or more owners that is not organized as a corporation.
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Securities and Exchange Commission (SEC)
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U.S. governmental agency that oversees the U.S. financial markets.
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Sole Proprietorship
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A business with a single owner.
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Cost Principle
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A principle that states that acquired assets and services should be recorded at their actual cost.
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Going Concern Assumption
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Assumes that the entity will remain in operation for the foreseeable future.
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Stockholder
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A person who owns stock in a corporation.
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Audit
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An examination of a company's financial statements and records.
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International Accounting Standards Board (IASB)
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The private organization that oversees the creation and governance of International Financial Reporting Standards (IFRS).
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International Financial Reporting Standards (IFRS)
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A set of global accounting guidelines, formulated by the International Accounting Standards Board (IASB).
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Monetary Unit Assumption
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The assumption that requires the items on the financial statements to be measured in terms of a monetary unit.
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Sarbanes-Oxley Act (SOX)
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Requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.
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Accounting Equation
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The basic tool of accounting, measuring the resources of the business (what the business owns or has control of) and the claims to those resources (what the business owes to creditors and to the owners). Assets = Liabilities + Equity.
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Assets
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Economic resources that are expected to benefit the business in the future. Something the business owns or has control of.
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Equity
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The owners' claims to the assets of the business.
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Expenses
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The cost of selling goods or services.
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Liabilities
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Debts that are owed to creditors.
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Net Income
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The result of operations that occurs when total revenues are greater than total expenses.
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Net Loss
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The result of operations that occurs when total expenses are greater than total revenues.
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Owner's Capital
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Owner contributions to business.
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Owner's Withdrawals
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Payments of equity to the owner.
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Revenues
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Amounts earned from delivering goods or services to customers.
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Transaction
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An event that affects the financial position of the business and can be measured with faithful representation.
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Common Stock
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Represents the basic ownership of a corporation.
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Contributed Capital
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Owner contributions to a corporation.
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Retained Earnings
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Equity earned by profitable operations of a corporation that is not distributed to stockholders.
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Accounts Payable
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A short-term liability that will be paid in the future.
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Accounts Receivable
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The right to receive cash in the future from customers for goods sold or for services performed.
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Financial Statements
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Business documents that are used to communicate information needed to make business decisions.
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Income Statement
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Reports the net income or net loss of the business for a specific period.
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Statement of Owner's Equity
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Shows the changes in the owner's capital account for a specific period.
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Balance Sheet
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Reports on the assets, liabilities, and owner's equity of the business as of a specific date.
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Statement of Cash Flows
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Reports on a business's cash receipts and cash payments for a specific period.
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Statement of Retained Earnings
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Reports how the company's retained earnings balance changed from the beginning to the end of the period.
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Average total assets
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Measures how efficiently a business uses its average total assets to generate sales. Net sales / Average total assets.
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Return on Assets (ROA)
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Measures how profitably a company uses its assets. Net income / Average total assets.
