Accounting: Key Concepts and Financial Statements

Vocabulary flashcards covering core accounting concepts and financial statements from the lecture notes.

Accounting

An information and measurement system that identifies, records, and communicates an organization’s business activities.

External users

People outside the organization who use accounting information (e.g., shareholders, lenders, regulators, external auditors).

Internal users

People inside the organization who use accounting information (e.g., purchasing, HR, production, R&D, and marketing managers).

Ethics

Beliefs that distinguish right from wrong; essential for the trustworthiness of accounting information.

Fraud Triangle

Three factors present for fraud: opportunity, pressure, and rationalization.

Cost Principle

Accounting information is based on actual cost and is objective.

Revenue Recognition Principle

Revenue is recognized when goods or services are provided and at an amount expected to be received.

Expense Recognition Principle (Matching Principle)

Expenses are recorded in the period incurred to generate the revenue.

Full Disclosure Principle

Notes to the financial statements disclose details that would affect users' decisions.

Going-Concern Assumption

The business is presumed to continue operating in the foreseeable future.

Monetary Unit Assumption

Transactions are expressed in monetary units (money).

Time Period Assumption

The life of a business is divided into standard time periods (months/years).

Business Entity Assumption

A business is accounted for separately from its owner.