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Accounting
An information and measurement system that identifies, records, and communicates an organization’s business activities.
External Users
Shareholders, lenders, external auditors, nonmanagerial employees, regulators.
Internal Users
Purchasing managers, human resource managers, production managers, research and development managers, marketing managers.
Ethics
Beliefs that separate right from wrong; good ethics are good business.
Fraud Triangle
A model for explaining the factors that cause someone to commit occupational fraud.
GAAP
Generally Accepted Accounting Principles; govern financial accounting concepts and rules.
FASB
Financial Accounting Standards Board; sets GAAP in the U.S.
SEC
Securities and Exchange Commission; oversees proper use of GAAP by public companies.
IASB
International Accounting Standards Board; issues International Financial Reporting Standards (IFRS).
Conceptual Framework
Provides objectives, qualitative characteristics, elements, and principles for accounting.
Accounting Principles
Include measurement, revenue recognition, expense recognition, and full disclosure principles.
Accounting Assumptions
Going-Concern, Monetary Unit, Time Period, Business Entity.
Cost-benefit Constraint
Information disclosed must have benefits greater than costs.
Business Entity Structures
Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC).
Assets
Resources a company owns or controls.
Liabilities
Creditors’ claims on assets.
Equity
Owner’s claim on assets, equal to assets minus liabilities.
Accounting Equation
Assets = Liabilities + Equity.
Financial Claims
Assets, Liabilities, Stockholders’ Equity.
Expanded Accounting Equation
Includes Contributed Capital, Common Stock, Retained Earnings, Dividends, Revenues, Expenses.
Financial Statements
Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flows.