Term
| Objective of external financial reporting: |
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Definition
| To provide useful economic information to external users for decision making. |
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Term
| Qualitative characteristics of financial information: |
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Definition
- Relative
- Reliable
- Comparable
- Consistent
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Term
| Elements to be measured and reported: |
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Definition
- Assets
- Liabilities
- Stockholders' Equity
- Revenues
- Expenses
- Gains
- Losses
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Term
| Concepts for measuring and reporting informatio: |
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Definition
- Assumptions
- Principles
- Exceptions
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Term
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Definition
- Seperate-entity
- Unit-of-measure
- Continuity
- Time Period
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Term
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Definition
- Historical Cost
- Revenue Recognition
- Matching
- Full Disclosure
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Term
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Definition
- Cost-benefit
- Materiality
- Conservatism
- Industry Practices
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Term
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Definition
- predictive value
- feedback value
- timeliness
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Term
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Definition
- verifiability,
- representational faithfulness,
- and neutrality.
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Term
| Primary charateristics of useful economic informatio: |
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Definition
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Term
| Secondary characteristics of useful econoic information: |
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Definition
- Comparability
- Consistency
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Term
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Definition
| the users of accounting information (aka decision makers) include average investors, creditors, and experts who provide financial advice; expected to have a reasonable understanding of accounting concepts and procedures; need to be able to use financial information to help them predict future cash flows related to investing and financing |
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Term
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Definition
| economic resource with probable future benefits. |
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Term
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Definition
| probable future sacrifices of economic resources. |
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Term
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Definition
| financing provided by owners and business operations. |
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Term
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Definition
increase in assets or settlement of liabilities from ongoing
operations. |
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Term
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Definition
decrease in assets or increase in liabilities from ongoing
operations. |
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Term
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Definition
increase in assets or settlement of liabilities from peripheral
activities. |
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Term
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Definition
decrease in assets or increase in liabilities from peripheral
activities. |
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Term
| Three of the four basic _______ that underlie accounting measurement and reporting relate to the balance sheet and one of the four basic ______ relates to the _____ _____ . |
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Definition
- assumptions
- principles
- balance sheet
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Term
| Separate entity assumption: |
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Definition
| business transactions are accounting for separately from the transactions of owners |
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Term
| Unit-of-measure assumption: |
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Definition
| accounting information should be measured and reported in the national monetary unit (i.e. dollars ($) in the US |
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Term
| Continuity (or going-concern) assumption: |
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Definition
| states that businesses are assumed to continue to operate into the foreseeable future |
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Term
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Definition
| requires assets to be recorded at historical cost, that on the date of the transaction, is cash paid plus the current dollar value of all noncash considerations also given in the exchange |
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Term
| The ________ ________ also contains exceptions to measurement and reporting rules that allow for variations in practice while continuing to provide relevant and reliable information to users. |
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Definition
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Term
| The ___________exception suggests that when relatively small (immaterial) dollar amounts are not likely to influence a user's decision, the item can be accounted for in the most cost-beneficial manner. |
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Definition
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Term
| The _______ ________ suggests that, when options in measurement exist and no option is better than any other, accountants should apply the methods that do not overstate assets and revenues or understate liabilities and expenses—that is, they should choose conservative methods. |
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Definition
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Term
| Objective of Financial Reporting: |
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Definition
| To provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers. |
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Term
Qualitative Characteristics (limited by materiality and costs):
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Definition
Fundamental (to be useful):
Relevance
Faithful representation
Enhancing (degrees of usefulness):
Comparability
Verifiability
Timeliness
Understandability |
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Term
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Definition
| results from owners’ providing assets to the company in exchange for stock (evidence of ownership); investments of the owners |
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Term
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Definition
| the cumulative earnings that are not distributed to the owners and are reinvested in the business (Increased by net income and reduced by declared dividends) |
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Term
| ___________ are certain recorded economic “events” which impact an entity. |
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Definition
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Term
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Definition
| exchanges of assets, goods or services by one party for assets, services, or promises to pay (liabilities) by one or more parties (i.e. sale of merchandise to customers) |
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Term
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Definition
| certain events that are not exchanges between the business and other parties but nevertheless have a direct and measurable effect on the entity (recording the usage of assets – depreciation) |
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Term
| An ________ is standardized format that organizations use to accumulate the dollar effects of transactions on each financial statement item. |
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Definition
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Term
| Because business decisions often involve an element of risk, managers should understand exactly how transactions impact the financial statements. The process for determining the effects of transactions is called ___________ _________. |
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Definition
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Term
| _______________ ___________ is the process of studying a transaction to determine its economic effect on the business in terms of the accounting equation. |
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Definition
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Term
Two principles underlie the transaction analysis process:
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Definition
1.Dual effect: Every transaction affects at least two accounts; correctly identifying those accounts and the direction of the effect (whether increase or decrease) is critical.
2.Accounting equation: The accounting equation must remain in balance after each transaction. |
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Term
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Definition
| an accounting method for expressing the effects of a transaction on accounts in a debits = credits format. |
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Term
| General journal: the book of original entry. |
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Definition
| All transactions are recorded in the journal in chronological order and show the debit and credit effects on specific accounts. |
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Term
| The journal makes several significant contributions to the recording process: |
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Definition
1. It discloses in one place the complete effects of a transaction
2. It provides a chronological record of transactions.
3. It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared |
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Term
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Definition
| Two accounts, one debit and one credit. |
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Term
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Definition
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Term
_______contains the entire group of
accounts maintained by a company. |
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Definition
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Term
A ________ _______ contains all the asset,
liability, owner’s equity, revenue, and
expense accounts and their balances. |
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Definition
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Term
Account balances are found in the _____
(a group of accounts). The _____ is
referred to as the “final” book of entry. |
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Definition
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Term
| _________ _________ measures the ability of the company to pay its short-term obligations with current assets. Although a ratio between 1.0 and 2.0 indicates sufficient current assets to meet obligations when they come due, many companies with sophisticated cash management systems have ratios below 1.0. |
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Definition
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Term
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Definition
Current Assets
Current Liabilities
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