Accounting Theories

Vocabulary flashcards covering the fundamental concepts, assumptions, qualitative characteristics, and elements of accounting theories based on the lecture by Shyam Kumar Dulal.

Financial Information

Anything related to the financial activities and performance of a business, often collected through financial statements or reports.

Statement of Financial Position

Also called a balance sheet, it is a financial statement that lists a business’s assets, liabilities, and equity balances at a particular point in time.

Statement of Income

Also called an income statement or profit and loss statement, it shows a company’s revenue and expenses for a period of time, such as a quarter or year.

Statement of cash flow

A document of the flow of cash into and out of a business that summarizes the amount of cash a business has on hand for a particular period.

Statement of Equity

Also referred to as a statement of changes in stockholders' equity, it illustrates the changes in a shareholder's equity over time.

Notes (foot Notes)

Additional disclosures in financial statements providing details on items such as environmental remediation costs, employee benefits, and contingent liabilities.

Stakeholders

Individuals or groups interested in business entities, categorized into internal (employees, managers, owners) and external (suppliers, society, government, creditors, shareholders, customers).

Separate Business Entity

An assumption in preparing financial statements that the business is distinct from its owners, who provide capital and receive profit returns.

Going Concern

A concept assuming a business will continue to trade for the foreseeable future, allowing costs and revenues to be allocated to future accounting periods.

Money Measurement Concept

A principle stating that a business should only record transactions that can be expressed in terms of money to ensure quantifiable and objective data.

Accounting Period

A defined timeframe, such as a calendar year, fiscal year, month, or quarter, during which a company conducts and records its financial activities.

Accruals and Matching Principle

A fundamental accounting concept ensuring that revenues and expenses are recognized in the same accounting period in which they are incurred, regardless of when cash transactions occur.

Revenue Recognition

The practice of recording revenues when they are earned, rather than when the actual cash is received.

Expense Recognition

The practice of recording expenses when they are incurred, rather than when they are paid.

Historical Cost

The principle of recording business assets, liabilities, and equities at their original purchase price in the balance sheet.

Relevance

A qualitative characteristic where information meets the needs of users to assist in evaluating performance.

Reliability

A qualitative characteristic where information is free from material error, neutral, complete, and prudent, allowing it to be relied upon.

Comparability

The ability to compare financial information with other businesses or with the results of previous periods, ensuring like things look alike.

Understandability

The presentation of information in a clear and concise manner so that it is understandable to users.

Verifiability

A characteristic where knowledgeable and independent observers could reach a consensus that a depiction is a faithful representation.

Timeliness

The availability of information to decision-makers in time to be capable of influencing their decisions.

Asset

A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Liability

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.

Equity

The residual interest in the assets of the entity after deducting all its liabilities.

Income

Increases in economic benefits during the accounting period in the form of asset inflows/enhancements or liability decreases that result in increases in equity, other than contributions from equity participants.

Expenses

Decreases in economic benefits during the accounting period in the form of asset outflows/depletions or liability incurrences that result in decreases in equity, other than distributions to equity participants.