ACC 302 Exam 1 Accounting Concepts and Analysis

Vocabulary flashcards covering fundamental accounting concepts, accounting methods, key financial terms, income terminology, and financial statement analysis techniques from the ACC 302 Exam 1 review notes.

Generally Accepted Accounting Principles (GAAP)

The standardized rules and guidelines for financial accounting and reporting.

Cost Principle

Transactions are recorded at their original historical cost, not current market value.

Business Entity Concept

A business's financial transactions must be kept completely separate from the personal finances of its owners.

Going Concern Principle

Assumes the business will continue operating indefinitely unless there is evidence to the contrary.

Monetary Unit Assumption

Only transaction data that can be expressed in terms of money is included in accounting records.

Time Period Assumption

The economic life of a business can be divided into artificial time periods (e.g., monthly, quarterly, yearly).

Matching Principle

Expenses must be recognized and matched in the same period as the revenues they helped generate.

Full Disclosure Principle

Financial statements must include all material information necessary for a user to make informed decisions.

Cash Accounting

Revenues are recorded when cash is received; expenses are recorded when cash is paid out.

Accrual Accounting

Revenues are recorded when earned (service provided/goods delivered); expenses are recorded when incurred, regardless of when cash changes hands. Required by GAAP.

Assets

Resources owned or controlled by the business that carry future economic value (e.g., Cash, Accounts Receivable, Inventory, Equipment).

Liabilities

Obligations or debts owed by the business to outside parties (e.g., Accounts Payable, Notes Payable, Accrued Expenses).

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities ($\text{Assets} - \text{Liabilities} = \text{Equity}$).

Common Stock

Represents ownership shares issued by a corporation.

Additional Paid-in Capital

Amount invested by stockholders above the par value of the stock.

Retained Earnings

Cumulative net income retained in the business rather than distributed to shareholders as dividends.

Treasury Stock

Company's own stock that has been repurchased from shareholders.

Deferred Income Taxes

Tax liabilities or assets arising from timing differences between accounting rules (GAAP) and tax laws.

Operating Profit / Net Operating Income

Income generated strictly from core business operations before deducting interest and income taxes.

Net Income

The final profit ("bottom line") after subtracting all expenses, interest, and income taxes from total revenue.

Horizontal Analysis (Comparative Analysis)

Compares financial data across two or more periods (e.g., comparing 2025 vs. 2026) to identify trends, absolute dollar changes ($\text{Dollar Change} = \text{Current Year} - \text{Base Year}$), and percentage changes ($\text{Percentage Change} = \frac{\text{Dollar Change}}{\text{Base Year}} \times 100$).

Vertical Analysis (Common-Sized Analysis)

Evaluates financial statement items as a percentage of a single base figure within the same period (Total Revenue/Net Sales on Income Statement, or Total Assets/Total Liabilities & Equity on Balance Sheet).