Accounting Terms

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15.

Account

a standardized format that organizations use to accumulate the dollar effect of transactions on each financial statement item A system that collects and processes financial information about an organization and reports that information to decision makers. the process followed by entities to analyze and record transactions, adjust the records at the end of the period, prepare financial statements, and prepare the records for the next cycle is the organization for which financial data are to be collected. the time period covered by the financial statement. records revenues when earned and expenses when incurred, regardless of the timing of cash receipts or payments previously unrecorded expenses that need to be adjusted at the end of the accounting period to reflect the amount incurred and the related payable account. previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and the related receivable account entries necessary at the end of the accounting period to measure all revenues and expenses of that period are economic resources with probable future benefits owned by the entity as a result of past transactions. an examination of the financial reports to ensure that they represent what they claim and conform with GAAP reports the amount of assets, liabilities, and stockholders' equity of an accounting entity at a point in time. Assets = Liabilities + stockholders' equity

18.

Continuity Assumption ContraAccount Contributed Capital Credit Current Assets

states that businesses are assumed to continue to operate into the foreseeable future. an account that is an offset to, or reduction of, the primary account. results from owners providing cash to the business is on the right side of an account are assets that will be used or turned into cash within one year. inventory is always considered a current asset regardless of the time needed to produce and sell it. are obligations that will be settled by providing cash, goods, or services within the coming year is on the left side of an account previously acquired assets that need to be adjusted at the end of the accounting period to reflect the amount of expense incurred in using the assets to generate revenue. previously recorded liabilities that need to be adjusted at the end of the accounting period to reflect the amount of revenue earned decreases in assets or increases in liabilities from ongoing operations incurred to generate revenues during the periods is the private sector body given the primary responsibility to work out the detailed rules that become generally accepted accounting principles. increases in assets or decreases in liabilities from peripheral transactions. are the measurement rules used to develop the information in financial statements

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Accounting

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Accounting Cycle

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Accounting Entity Accounting Period Accrual Basis Accounting Accrued Expenses

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Current Liabilities Debit Deferred Expenses

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23. 54.

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Accrued Revenues

Deferred Revenues Expenses

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Adjusting Entries Assets

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Financial Accounting Standards Board (FASB) Gains Generally Accepted Accounting Principles (GAAP) Historical Cost Principle Income Statement Journal Entry Liabilities

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Audit

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Balance Sheet

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Basic Accounting Equation Cash Basis Accounting Closing Entry

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records revenues when cash is received and expenses when cash is paid
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requires assets to be recorded at historical cost-cash paid plus the current dollar value of all noncash considerations given on the date of exchange. reports the revenues less the expenses of the accounting period. an accounting method for expressing the effects of a transaction on accounts in a debits-equal-credits format. are probable debts or obligations of the entity that results from past transactions , which will be paid with assets or services.

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transfers balances in temporary accounts to retained earnings and establishes zero balances in temporary accounts exception suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses.

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Conservatism

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Losses Matching Principle Materiality

decreases in assets or increases in liabilities from peripheral transactions. requires that expenses be recorded when incurred in earning revenue exception suggests that small amounts that are not likely to influence a user's decision can be accounted for in the most cost-beneficial manner. of an asset is the difference between its acquisition cost and accumulated depreciation, its related contra-account provide supplemental information about the financial condition of a company without which the financial statements cannot be fully understood. the time it takes for a company to pay cash to suppliers, sell goods and services to customers, and collect cash from customers. the balance sheet accounts that carry their ending balances into the next accounting period should be prepared as the last step of the accounting cycle to check that debits equal credits and all temporary accounts have been closed. is to provide useful economic information about a business to help external parties make sound financial decisions.

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Securities and Exchange Commission (SEC) SeparateEntity Assumption Statement of Cash Flows Statement of retained Earnings Stockholders' Equity T-account

the U.S. government agency that determines the financial statements that public companies must provide to stockholders and the measurement rules that they must use in producing those statements. states that business transactions are accounted for separately from the transactions of owners. reports inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing. reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period. the financing provided by the owners and business operations is a tool for summarizing transaction effects for each account, determining balances, and drawing inferences about a company's activities. income statement accounts that are closed to retained earnings at the end of the accounting period indicates that the long life of a company can be reported in shorter time periods a exchange of assets or services for assets, services, or promises to pay between a business and one or more external parties to a business or a measurable internal event such as the use of assets in operations. the process of studying a transaction to determine its economic effect on the business in terms of the accounting equation a list of all accounts with their balances to provide a check on the equality of the debits and credits. states that accounting information should be measured and reported in the national monetary unit.

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Net Book Value Notes

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Operating Cycle Permanent Accounts Post-Closing Trial Balance Primary Objective of External Financial Reporting Public Company Accounting Oversight Board (PCAOB) Relevant Information Reliable Information Retained Earnings Revenue Principle

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Temporary Accounts Time Period Assumption Transaction

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the private sector body given the primary responsibility to issue detailed auditing standards.

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Transaction Analysis Trial Balance

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can influence a decision, timely and has predictive and or feedback value accurate, unbiased, and verifiable refers to the cumulative earnings of a company that are not distributed to the owners and are reinvested in the business states that revenues are recognized when goods or services are delivered, there is persuasive evidence of an arrangement for customer payment, the price is fixed or determinable, and collection is reasonably assured increases in assets or settlements of liabilities from ongoing operations

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Unit-ofMeasure Assumption

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Revenues