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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.