C213 - Ch 2 terms

Revelance

provided on a timely basis and can be used to access the past and project the future for decision making

Reliable

actually represents what it is supposed to represent

Conservative

practice of recognizing all losses but not recognizing gains until they are certain

Comparable

allows a company’s financial statements to be analyzed in light of the company’s own performance in prior years or other companies performance

Materiality

the concept that weighs whether a certain dollar amount is large enough to make a difference to anyone. For small amounts, convenient accounting is often preferred over elaborate, theoretically correct treatment.

Articulation

the idea that the three primary financial statements are interrelated

Assets

probable future economic benefits obtained or controlled by a company as a result of past transactions or events

Liabilities

probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services in the future as a result of past transactions or events

Owners’ equity/ stockholders’ equity

residual interest in the assets of a company that remains after deducting liabilities 

Income Statement

expenses and revenues (period of time)

balance sheet

assets, liabilities, equity - a point in time

Statement of Cash Flows

All of a company’s cash transactions (operating, investing, financing)

Notes to financial statements

provides information on the accounting assumptions used in preparing the statements and also provide supplemnetal information not included in the statements themselves

a summary of significant accounting policies

revenue recognition, inventory methods, depreciation methods, use of estimate

additional information about summary totals in the statements

inventory make up, receivables, pension liability

disclosure of important information not recognized

status of legal proceedings, subsequent events

supplemental information required by the FASB or SEC

business segment information, domestic/ international sales breakdown