chapter 1 the demand for and supply of financial accounting information

financing activities

activities that include all the cash inflows and outflows involved in the financing activities of the company

operating activities

activities to invest the financial capital in productive resources that are necessary to operate the business

investing activities

the company generates revenues from producing goods and/or services and selling them to customers

stakeholders

parties with some type of interest in the company's interest

financial reporting process

communicates financial accounting information to existing and potential investors, creditors, lenders, and other external decision makers

principals

own the resources

agents

have day-to-day control of those resources

accounting standards

increase investors and other principals’ confidence in the relevance and faithful representation of a company’s financial information

independent audits

carefully evaluate a company’s accounting records and verify whether the financial statements are fairly presented in accordance with professional standards

securities & exchange commission (sec)

an agency of the U.S. government that has the authority to protect investors, maintain fair, orderly, & efficient markets, & facilitate capital formation

form 10-k

an annual report including financial statements

form 10-q

a quarterly report including financial statements

form 20-f

an extensive annual report from non-U.S. companies

form 8-k

a report used to describe significant events that have affected or may affect the company

proxy statement

a report used when management requests the right to vote through proxies for shareholders at shareholders’ meetings

financial accounting standards board (fasb)

the authoritative body that has the primary responsibility for developing accounting principles

international accounting standards board (iasb)

an organization that issues International Financial Reporting Standards for many countries outside the United States

emerging issues task force (eitf)

works to provide timely guidance on new, specific accounting issues

fasb accounting standards codification

a searchable electronic database that integrates and topically organizes u.s. gaap into one coherent body of literature

international convergence of accounting standards

a goal and the path taken to reach accounting standards

balance sheet (statement of financial position)

the financial position of a company which includes assets, liabilities, and shareholders’ equity at a point in time

assets

present rights of an entity to economic benefits

liabilities

present obligations of an entity to transfer economic benefits

shareholders’ equity

a residual interest claim

income statement

a summary of the revenue & expenses for a specific period of time, usually a quarter or a year

revenues

the inflows of assets and the settlements of obligations from selling goods and providing services to customers

expenses

the outflows of assets that a company consumes and the obligations it incurs in operating the business to generate revenues

statement of cash flows

the net cash flows (inflows minus outflows) from operating, investing, and financing activities for a period of time

statement of stockholders’ equity

the information about the common shareholders’ equity claims on the company and how those claims changed during the period

earned capital accounts

retained earnings, accumulated other comprehensive income, treasury stock

sarbanes-oxley act of 2002

makes management responsible for financial statements and the underlying accounting and control system that generates the financial statements

ethical dilemmas

situations in which an accountant must make a decision about what is the “right” (ethical) action to take in given circumstances

code of professional conduct (cpc)

helps guide members in performing their responsibilities in public practice, industry, government, and education