Financial Accounting 1 - Chapter 1

Terms pulled from Horngren's Financial & Managerial Accounting 7th Edition

accounting

the information system that measures business activities processes the information into reports, and communicates the results to decision maker

financial accounting

provides information for external decision makers, such as outside investors, lenders, customers, and the federal government

managerial accounting

focuses on information for internal decision makers, such as the company’s managers and employees

CPA/certified public accountant

licensed professional accountants who serve the general public

chartered global management accountant

accountants with advanced knowledge in finance, operations, strategy, and management

CMA/certified management accountant

accountants with advanced knowledge in finance, operations, strategy, and management

CFP, certified financial planner

work with individauls to help them budget, plan for retirement, save for education, and manage their finances

creditor

person of business to whom a business owes money

FASB, financial accounting standards board

the private organization that oversees the creation and governance of accounting standards in the US

SEC, securities and exchange commission

US governmental agency that oversees the US financial markets

GAAP, generally accepted accounting principles

accounting guidlines, currently formulated by the FASB; the main US accounting rulebook

faithful representation

providing information that is complete, neutral, and free from error

economic entity

an organization that stands apart as a separate economic unit

sole proprietorship

business with a single owner

partnership

business with two or more owners and not organized as a corporation

corporation

a business organized under state law that is a separate legal entity

limited-liability company, LLC

a company in which each member is only liable for his or her own actions

cost principle

acquired assets and services should be recorded at their actual cost not assumed value

going concern assumption

assumes that the entity will remain in operation for the forseeable future

monetary unit assumption

requires that the items on the financial statement be measured in terms of a monetary unit

IFRS, international financial reporting standards

set of global accounting standards used by more than 166 nations

audit

examination of a company’s records

SOX, sarbanes-oxley act

requires management to review internal control and take responsibility for the accuracy and completeness of their financial reports

PCAOB, public company accounting oversight board

monitors the work of independent accountants who audit public companies

accounting equation

measures resources of the business and the claims to those resources

asset

economic resources that is expected to benefit the business in the future and something the business owns or has control of

liabilities

debts that are owed to creditors

equity

the owners claims to the assets of the business

contributed capital

owner contributions to a corporation

common stock

represents the basic ownership of a corporation

common stock

represents the basic ownership of a corporation

retained earning

equity earned by profitable operations that is not distributed to stockholders

dividend

a distribution of a corporations earnings to stockholders

revenues

amounts earned from delivering goods or services to customers

expenses

costs of selling goods or services

net income

the result of operations that occurs when total revenues are greater than total expenses

net loss

the result of operations that occurs when total expenses are greater than total revenues

transaction

any event