Exam 1 Vocab.docx

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Accounting General
ACG 2021
Steven Neel

Chapter 1 Accounting: A system of maintaining records of a company's operations and communicating that information to decision makers. Accounting equation : Equation that shows a company's resources (assets) equal creditors' and owners' claims to those resources (liabilities and stockholders' equity). Assets: Resources owned by a company Auditors: Trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company's financial statements Auditors: Trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company's financial statements Balance sheet: A financial statement that presents the financial position of the company on a particular date. Comparability: The ability of users to see similarities and differences between two different business activities. Consistency: The use of similar accounting procedures either over time for the same company, or across companies at the same point in time Corporation: An entity that is legally separate from its owners. Cost effectiveness: Financial accounting information is provided only when the benefits of doing so exceed the costs Decision usefulness: The ability of the information to be useful in decision making. Dividends: Cash payments to stockholders. Economic entity assumption: All economic events with a particular economic entity can be identified. Ethics: A code or moral system that provides criteria for evaluating right and wrong behavior. Expenses: Costs of providing products and services. Faithful representation: Accounting information that is complete, neutral, and free from material error. Financial accounting: Measurement of business activities of a company and communication of those measurements to external parties for decision-making purposes. Financial Accounting Standards Board (FASB): An independent, private body that has primary responsibility for the establishment of GAAP in the United States Financial statements: Periodic reports published by the company for the purpose of providing information to external users. Financing activities: Transactions involving external sources of funding Generally accepted accounting principles (GAAP): The rules of financial accounting. Going concern assumption: In the absence of information to the contrary, a business entity will continue to operate indefinitely. Income statement: A financial statement that reports the company's revenues and expenses over an interval of time. International Accounting Standards Board (IASB)1: An international accounting standard-setting body responsible for the convergence of accounting standards worldwide. International Financial Reporting Standards (IFRS)1: The standards being developed and promoted by the International Accounting Standards Board. Investing activities1: Transactions involving the purchase and sale of (1) long-term resources such as land, buildings, equipment, and machinery and (2) any resources not directly related to a company's normal operations Liabilities: Amounts owed to creditors Materiality: The impact of financial accounting information on investors' and creditors' decisions. Monetary unit assumption: A unit or scale of measurement can be used to measure financial statement elements. Net income1: Difference between revenues and expenses. Operating activities1: Transactions involving the primary operations of the company, such as providing products and services to customers and the associated costs of doing so, like utilities, taxes, advertising, wages, rent, and maintenance. Partnership: Business owned by two or more persons Relevance: Accounting information that possesses confirmatory value and/or predictive value. Sarbanes-Oxley Act (SOX): Formally titled the Public Company Accounting Reform and Investor Protection Act of 2002, this act provides regulation of auditors and the types of services they furnish to clients, increases accountability of corporate executives, addresses conflicts of interest for securities analysts, and provides for stiff criminal penalties for violators. Statement of cash flows1: A financial statement that measures activities involving c
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