ACC 201 CH-1

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  1. Accounting
    A system of maintaining records of a company's operations and communicating that information to decision makers.
  2. Accounting equation
    Equation that shows a company's resources (assets) equal creditors' and owners' claims to those resources (liabilities and stockholders' equity). p. 7
  3. Assets
    Resources owned by a company. p. 7
  4. Auditors
    Trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company's financial statements. p. 23
  5. Balance sheet
    A financial statement that presents the financial position of the company on a particular date. p. 13
  6. Comparability
    The ability of users to see similarities and differences between two different business activities. p. 30
  7. Consistency
    • The use of similar accounting procedures either over time for the same
    • company, or across companies at the same point in time. p. 30
  8. Corporation
    An entity that is legally separate from its owners. p. 6
  9. Cost effectiveness
    Financial accounting information is provided only when the benefits of doing so exceed the costs. p. 30
  10. Decision usefulness
    The ability of the information to be useful in decision making. p. 29
  11. Dividends
    Cash payments to stockholders. p. 8
  12. Economic entity assumption
    All economic events with a particular economic entity can be identified. p. 31
  13. Ethics
    A code or moral system that provides criteria for evaluating right and wrong behavior. p. 24
  14. Expenses
    Costs of providing products and services. p. 8
  15. Faithful representation
    Accounting information that is complete, neutral, and free from material error. p. 29
  16. Financial accounting
    Measurement of business activities of a company and communication of those measurements to external parties for decision-making purposes. p. 5
  17. Financial Accounting Standards Board (FASB)
    An independent, private body that has primary responsibility for the establishment of GAAP in the United States. p. 21
  18. Financial statements
    Periodic reports published by the company for the purpose of providing information to external users. p. 10
  19. Financing activities
    Transactions involving external sources of funding. p. 5
  20. Generally accepted accounting principles (GAAP)
    The rules of financial accounting. p. 21
  21. Going concern assumption
    In the absence of information to the contrary, a business entity will continue to operate indefinitely. p. 31
  22. Income statement
    A financial statement that reports the company's revenues and expenses over an interval of time. p. 11
  23. International Accounting Standards Board (IASB)
    An international accounting standard-setting body responsible for the convergence of accounting standards worldwide. p. 22
  24. International Financial Reporting Standards (IFRS)
    The standards being developed and promoted by the International Accounting Standards Board. p. 22
  25. Investing activities
    Transactions involving the purchase and sale of (1) long-term resources such as land, buildings, equipment, and machinery and (2) any resources not directly related to a company's normal operations. p. 5
  26. Liabilities
    Amounts owed to creditors. p. 7
  27. Materiality
    The impact of financial accounting information on investors' and creditors' decisions. p. 30
  28. Monetary unit assumption
    A unit or scale of measurement can be used to measure financial statement elements. p. 31
  29. Net income
    Difference between revenues and expenses. p. 8
  30. Operating activities
    Transactions involving the primary operations of the company, such as providing products and services to customers and the associated costs of doing so, like utilities, taxes, advertising, wages, rent, and maintenance. p. 5
  31. Partnership
    Business owned by two or more persons. p. 9
  32. Periodicity assumption
    The economic life of an enterprise (presumed to be indefinite) can be divided into artificial time periods for financial reporting. p. 31
  33. Relevance
    Accounting information that possesses confirmatory value and/or predictive value. p. 29
  34. Retained earnings
    • Cumulative amount of net income earned over the life of the company that
    • has not been distributed to stockholders as dividends. p. 12
  35. Revenues
    Amounts earned from selling products or services to customers. p. 8
  36. Sarbanes-Oxley Act (SOX)
    Formally titled the Public Company Accounting Reform and Investor Protection Act of 2002, this act provides regulation of auditors and the types of services they furnish to clients, increases accountability of corporate executives, addresses conflicts of interest for securities analysts, and provides for stiff criminal penalties for violators. p. 24
  37. Sole proprietorship
    A business owned by one person. p. 9
  38. Statement of cash flows
    A financial statement that measures activities involving cash receipts and cash payments over an interval of time. p. 15
  39. Statement of stockholders' equity
    A financial statement that summarizes the changes in stock-holders' equity over an interval of time. p. 12
  40. Stockholder's equity
    Stockholders', or owners', claims to resources, which equal the difference between total assets and total liabilities. p. 7
  41. Timeliness
    Information being available to users early enough to allow them to use it in the decision process. p. 30
  42. Understandability
    Users must understand the information within the context of the decision they are making. p. 30
  43. Verifiability
    A consensus among different measurers. p. 30
Card Set:
ACC 201 CH-1
2012-02-02 22:40:27
Accounting Information Decision Making

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