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Midterm

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Department
Commerce
Course
COMM 111
Professor
Terry Wang
Semester
Fall

Description
Chapter 1: 1. Financial Statements: business documents that companies use to report the results of their activities to various user groups (managers/ investors/ creditors/ regulatory agencies) 2. Accounting: the information system that measure business activities, processes data into reports, and communicates results to decision makers 3. Investors & Creditors: (shareholders /bankers) primary users of accounting information- provide the money to finance the company 4. Government & Regulatory Agencies: requires public companies to report to investing public 5. Taxing Authorities: All taxes (property /assets / income) 6. Financial Accounting: provides information for decision makers outside the organization (investors /creditors /government agencies /public) 7. Management Accounting: generates inside information for the managers of the organization 8. Proprietorship: single owner, personally liable 9. Partnership: joins two or more persons as co-owners 10.Limited Liability Partnerships (LLP): limits claims against partners to partnership assets 11.Corporations: incorporated business owned by shareholders 12.Shareholders: own shares of stock 13.Stock: Shares of ownership in a corporation 14.Board of Directors: sets policy for the corporation and appoints officers 15.Accounting Equation: assets = liabilities + shareholder’s equity 16.Assets: economic resources of a business that are expected to produce a benefit in the future 17.Liabilities: “outsider claims”, debts payable to outsiders, called creditors 18.Owners’ Equity (net assets, shareholders’ equity, capital): insider claims of a business 19.Cash and Cash Equivalents: the liquid (cash) assets that are the medium of exchange 20.Accounts Receivable: amount due from customers 21.Inventory: major asset: raw materials & finished products 22.Property, plant, equipment: long-lived assets, or capital assets, fixed assets, plant assets 23.Account Payable: liability for goods or services purchased on credit and supported by the credit standing of the purchaser 24.Long-term Debt: liability that falls due beyond one year from the date of the financial statement 25.Contributed Capital: amount the shareholders have invested in the corporation 26.Common Shares: basic component of contributed capital 27.Retained Earnings: amount earned by income-producing activities and kept for use in business 28.Revenues: inflows of resources that increase retained earnings from delivering goods or services to customers 29.Expenses: decreases in retained earnings that result from operations 30.Dividends: distributions to shareholders of assets (usually cash) generated by net income 31.Profit: excess of revenues over expenses 32.Net income (net profit): revenues exceed total expenses 33.Net loss: expenses exceed revenues 34.Statement of Retained Earnings: reports the portion of net income the company has retained 35.Balance Sheet (statement of financial position): reports three main categories: assets, liabilities, and shareholders’ equity 36.Current Assets: cast /cast equivalents & assets the company expects to convert to cast, sell, or consumer during the next 12 months 37.Current Liabilities: debts payable within one year within the entity’s normal operating cycle 38.Long-term Liabilities: liabilities due beyond on year after the balance sheet date 39.Statement of Cash flows: reports cash flows under three categories (operating, investing, and financing activities) 40. Operating Activities: result in net income or net loss, and either increase or decrease cash 41.Financing Activities: include both issuing and repurchasing shares of stock and borrowing and repaying funds 42.Investing Activities: buying buildings and equipment and disperses them when assets wear out 43.International Financial Reporting Standards (IFRS): generally accepted accounting principles in Canada (around the world) 44.Generally Accepted Accounting Principles (GAAP): professional guidelines followed by accountants 45.Publically Accountable Enterprises (PAEs): corporations that have issued or plan to issue shares or debt in public markets 46.Private Enterprises (PEs): required to follow the accounting standards Handbook* 47.Faithful Representation: decision-useful information about an economic phenomenon is complete, neutral, and not materially misstated 48.Going-Concern Assumption: assumes that the entity will remain in operation long enough to use existing assets for their intended purposes 49.Entity Assumption: states that the organization stands apart as a separate economic unit 50.Cost Assumption: requires that assets and liabilities be measured at their cost when they are acquired or assumed 51.Stable-monetary-unit assumption: accountants assumption that the dollar’s purchasing power is relatively stable 52.Ethics: shaped by our cultural, socioeconomic, and religious backgrounds Chapter 2 1. Transaction: any event that has a financial impact on a business and can be measured 2. Account: the record of all the changes in a particular asset, liability, or shareholders’ equity in a period 3. Prepaid Expense: an asset because the payment provides a future benefit for the business 4. Accrued Liability: a liability for an expense you have not yet paid 5. Double-Entry System: records the duel effects on the entity 6. Debit: left side of account 7. Credit: right side of account 8. Journal: chronological record of transactions used by accountants 9. Ledger: grouping of all T-accounts with their balances 10.Posting: copying data into the ledger 11.Trial Balance: lists all accounts with their balances (asset first, followed by liabilities and then shareholders’ equity) 12.Chart of accounts: used by organizations to list all accounts and account numbers Chapter 3 1. Accrual Accounting: records the impact of a business transaction as it occurs 2. Cash-basis Accounting: records only cash transactions- cash receipts and cash payments 3. Time-period concept: ensures that accounting information is reported at regular intervals 4. Revenue Principal: governs; when to record revenue & the amount of revenue to record 5. Deferral: an adjustment for which the business paid or received cash in advance 6. Depreciation: the allocation of the cost of capital (long-lived) asset to expense over the asset’s useful life 7. Accrual: opposite of deferral-records expense before paying cash 8. Unearned Revenue: liability that is an obligation arising from receiving cash before providing a service 9. Accumulated Depreciation: accounts shows the sum of all depreciation expense from the date of acquiring the asset 10.Contra Account: always has a companion account & its normal balance is the opposite of that companion account 11.Carrying amount: net amount of capital 12.Accrued Expense: a liability that arises from an expense that has not yet been paid 13.Accrued Revenue: a revenue that has been earned but not yet received cash 14.Adjusted Trial Balance: lists all the accounts and their final balances in a single place 15.Closing the books: preparing the accounts for the next period’s transactions 16.Closing Entries: set the balances of revenue and expense accounts back to zero at the end of the period 17.Temporary Accounts: revenues and expenses relate to a limited period 18.Permanent Accounts: assets, liabilities, shareholders’ equity, 19.Liquidity: Measures how quickly an item can be converted to cash 20.Operating Cycle: time span during which cash is paid for goods and services, and these goods and services are sold to bring in cash 21.Long-term assets: all assets not classified as current assets 22.Long-term liabilities: liabilities that are not current 23.Classified Balance Sheet: separates current assets from long-term assets and current liabilities from long-term liabilities 24.Single-Step income statement: lists all the revenues together under a heading such as Revenues or Revenues and Gains 25.Multi-Step income statement: contains a number of subtotals to highlight important relationships among revenues and expenses Chapter 4: 1. Lapping: misappropriating some of customers’ cheques, endorsing them, and depositing them in one’s own bank account 2. Lockbox system: for all cheques received by mail- immediately deposited 3. Misappropriation of assets: fraud committed by employees of an entity who steal money from the company and cover it up through erroneous entries in the books 4. Fraudulent Financial Reporting: fraud committed by company managers who make false misleading entries in the books, making financial results of the company appear to be better than they actually are 5. Earnings management: to meet profit targets (loans, earnings etc.) 6. Fraud Triangle: Opportunity, motive and rationalization 7. Internal Control: plan of organization and system of procedures designed, implemented, & maintained by company management & the board of directors to deal with risks to the business that have been identified (related to certain items) 8. Public Company: offers its securities (shares or debt) for sale to the general public 9. Treasurer: in charge of cash handling & signing & approving cheques 10.Controller: responsible for recording customer collections to individual customer accounts receivable 11.Budget: quantitative financial plan that helps control day-to-day management activities 12.Operating Budget: budget’s of future periods’ net income 13.Cash Budget: budgets of future periods’ cash receipts and cash disbursements 14.Exception Reporting: Managers required to explain variances & to take corrective actions in their operating plans to keep the budgets in line with expectations 15.Audit: an examination of the company’s financial statements and its accounting system, including controls 16.Password: electronic protection 17.Fidelity Bonds: an insurance policy the reimburses the company for any losses due to employee’s background 18.Computer Virus: malicious program that enters a program code without consent & performs destructive actions in the victim’s computer files or programs 19.Trojan horse: malicious computer program that hides inside a legitimate program and works like a virus 20.Phishing: involves creating bogus Web sites 21.Encryption: rearranges messages by a mathematical process 22.Firewall: limits access into a local network 23.Cheque: tells the bank to pay the designated party a specified amount 24.Remittance advice: optional attachment to check that tells the payee the reason for the payment 25.Bank Statement: reports what the bank did with the customer’s cash 26.Electronic Funds Transfer (EFT): moves cash by electronic communication 27.Bank Reconciliation: explains all differences between your cash records and your bank balance 28.Deposits in transit: you have recorded deposits, but bank has not 29.Outstanding Cheques: You have recorded these cheques, but the bank has not yet paid them 30.Bank Collections: cash receipts that the bank has recorded for your account 31.Non-sufficient funds (NSF) cheques: are cash receipts from customers who do not have sufficient funds in their bank account to cover the amount 32.Petty Cash: cash kept on hand by companies to pay minor amounts 33.Imprest System: maintaining the petty cash account at a balance, supported by the fund (cash plus slips) 34.Cash equivalents: include liquid assets such as time deposits and guaranteed investment certificates Chapter 5: 1. Short-term investment (market securities): investments that a company plans to hold for one year or less 2. Trading investment: purpose is to hold it for a short time and then sell it for more than its cost 3. Fair Value: amount the owner can receive when selling the investment 4. Receivables: monetary claims against others 5. Uncollectable-account expense: cost the company will be unable to collect
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