Introduction to Specific Accounting-Related Concepts (ACFM 104)

Vocabulary flashcards covering key concepts from ACFM 104, including types of firms, accounting terminology, and regulatory bodies.

Sole Proprietorship

A type of firm that is not a separate legal entity, typically private, with a single owner, where legal obligations and liabilities cannot be separated from the owner, and uses pass-through taxation.

Partnership

A type of firm that is not a separate legal entity, typically private, with more than one owner, dissolved and reformed if ownership changes, where legal obligations and liabilities cannot be separated from the owners, and uses pass-through taxation.

Limited Liability Company (LLC or LLP)

A popular type of private firm governed by state law, easy to create, which should create a separate entity (though still being tested in common law), and uses pass-through taxation (treated like a partnership or sole proprietorship).

Corporation (S or C)

A type of firm that is a separate legal entity, where ownership is evidenced by stock certificates, granting rights to vote and share in corporate distributions, and has a corporate governance structure.

C Corporation

A separate legal entity where ownership is evidenced by stock certificates, granting rights to vote and share in corporate distributions, and possesses a corporate governance structure.

Public Corporation

A corporation whose shares are offered to the public and are generally actively traded, with the company receiving proceeds only when the shares are initially offered to the public, adhering to the entity concept.

Private Corporation

A corporation where it is illegal to offer shares to the public without first registering with the SEC and state agencies, typically having very little regulation and usually only a few shareholders, sometimes referred to as 'closely held'.

Financial Accounting

Enables analysis, supports the capital market decision process, and requires the development and adherence to financial reporting standards.

Earnings/Profits/Income/Net Income

Synonymous terms referring to the financial gain or revenue of a business after all expenses have been deducted.

Liabilities/Debts/Obligations

Synonymous terms referring to financial obligations that must be paid or satisfied at some point in the future.

Equity/Owner’s Equity/Shareholder’s Equity/Stockholder’s Equity

Synonymous terms representing the residual interest in the assets of an entity after deducting liabilities, with the specific term used depending on the organizational structure.

Assets

Represent purchased resources that provide future benefit to the business.

Liabilities

Financial obligations that must be paid (satisfied) at some point in the future.

Matching Expenses to Period

The accounting principle that expenses should be recognized in the same period as the revenues they helped generate, or when they are incurred/consumed/expended.

Capitalization

The process of creating an asset from purchases that are expected to provide future economic benefits and will result in future expenses (e.g., depreciation).

Accrual

An accounting event where the transaction has transpired but cash has not yet been exchanged.

Deferral

An accounting event where cash has been exchanged but the transaction or event has not yet transpired.

General Purpose Financial Statements

Financial reports prepared in accordance with GAAP to provide information to a wide range of users.

GAAP (Generally Accepted Accounting Principles)

A common set of accounting principles, standards, and procedures that companies must follow to compile their financial statements.

FASB (Financial Accounting Standards Board)

The private sector organization in the United States responsible for establishing and improving GAAP.

SEC (Securities and Exchange Commission)

A U.S. government agency that oversees securities markets and is responsible for protecting investors, maintaining fair and orderly functioning of securities markets, and facilitating capital formation.

PCAOB (Public Company Accounting Oversight Board)

A private, non-profit corporation created by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies in order to protect investors.

IFRS (International Financial Reporting Standards)

A set of global accounting standards developed by the International Accounting Standards Board (IASB) that aim to make financial statements comparable across different countries.