Bus 020 Notes 2026

Accounting

The measurement and communication of business activities, requiring judgment; used by investors, creditors, and managers.

Financial Accounting

Accounting information provided to external users, focusing on measuring business activities and communicating them for decision making.

Managerial Accounting

Accounting focused on detailed plans and continuous performance reports for internal decision-makers.

Assets

Resources owned or controlled by a company as a result of past transactions.

Liabilities

Obligations of a company to transfer assets to other entities because of past transactions.

Stockholders’ Equity

The residual interest in the assets of a business after liabilities have been deducted.

Income Statement

A financial statement showing revenues, expenses, and net income over a specific period.

Net Income

The difference between revenues and expenses; also referred to as earnings or profit.

Accrual Accounting

An accounting method that recognizes revenue when earned and expenses when incurred, regardless of cash flow.

GAAP

Generally Accepted Accounting Principles; a framework of accounting guidelines that companies must follow.

PCAOB

Public Company Accounting Oversight Board; establishes auditing standards.

AICPA

American Institute of Certified Public Accountants; a professional organization that sets ethical standards for CPAs.

Dividends

Cash payments made to stockholders, which are not considered expenses.

Operating Activities

Transactions that relate to the primary operations of the company.

Investing Activities

Transactions involving the purchase and sale of resources expected to benefit the company for several years.

Financing Activities

Transactions the company has with investors and creditors.

Balance Sheet

A financial statement that presents a company's financial position at a specific point in time, showing assets, liabilities, and equity.

Depreciation Expense

The portion of an asset's cost allocated to a specific accounting period.

Earnings Per Share (EPS)

Net income available to common shareholders divided by the weighted average number of shares outstanding.

Contra Revenue Account

An account used to offset revenue from sales returns, discounts, or allowances.

Allowance for Bad Debts

An estimated amount reflecting accounts receivable that are expected not to be collected.

Net Realizable Value

The amount expected to be collected for accounts receivable, representing the net value reported on the balance sheet.

Cash Flow Statement

A financial statement that measures and communicates changes in cash over an interval.

Accounting Cycle

The process of identifying, recording, and adjusting transactions, concluding with preparing financial statements.