Intermediate Acct Ch1 Vocab

Assets

probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events

Liabilities

probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events

Equity

residual interest in the assets of an entity that remains after deducting its liabilities

Investment by Owners

increases in equity of a particular enterprise resulting from transfers to it from other entities of something of value to obtain or increase ownership interests in it

Distribution to Owners

decreases in equity of a particular enterprise resulting from transfers to owners

Comprehensive Income

the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources; includes all changes in equity during a period except those resulting from investments by owners and distributions to owners

Revenues

inflows or other enhancements of assets of an entity or settlements of its liabilities during a period from delivering or producing goods, rendering services or other activities that constitute the entity’s ongoing major or central operations

Expenses

outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations

Gains

increases in equity from peripheal or incidental transactions of an entity

Losses

represent decrease in equity arising from peripheral or incidental transactions

Predictive Value

information is useful in predicting the future

Relevance

pertinent to the decision at hand

Timeliness

information is available prior to the decision

Confirmatory Value

information confirms expectations

Understandability

users understand the information in the context of the decision being made

Faithful Representation

agreement between a measure and the phenomenon it purports to represent

Materiality

concerns the relative size of an item and its effect on decisions; a consequence is that GAAP need not be followed in all situations

Comparability

important to making inter firm comparisons

Neutrality

the absence of bias

Recognition

the process of admitting information into financial statements

Consistency

applying the same accounting practices over time

Cost Effectiveness

requires consideration of the costs and value of information

Verifability

implies consensus among different measures

Expense Recognition

record expenses in the period the related revenue is recognized

Periodicity

the life of an enterprise can be divided into artificial time periods

Historical Cost Principle

the original transaction value upon acquisition; the basis of measurement for many assets and liabilities

Revenue Recognition

criteria usually satisfied for products at point of sale

• earning process is complete

• there is a reasonable certainty that asset will be collected

Going Concern Assumption

the entity will continue indefinitely

Monetary Unit Assumption

financial statement elements should be measured in a particular monetary unit: a common denominator in the U.S. is the dollar; inflation causes a violation of this assumption

Economic Entity Assumption

the enterprise is separate from its owners and other entities; all economic events can be identified with a particular entity

Full-Disclosure Principle

all information that could affect decisions should be reported

Conservatism

accountants require greater verification before recognizing good news than bad news; not a qualitative characteristic, but a practical justification for some accounting choices; inconsistent with neutrality