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27 Cards in this Set
- Front
- Back
information system that measures, processes, and communicates financial information about an identifiable economic entity.
Provides information for decision making. |
Accounting
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economic unit that sells goods and services at prices that will provide an adequate return to its owners
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Business
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earning enough income to attract and hold investment capital
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Profitability
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keeping sufficient cash on hand to pay debts as they fall due
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Liquidity
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performance measures?
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cash flow (for liquidity), net income or loss (for profitability), and ratio of expenses to revenue (for operating activities)
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internal users
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management accounting
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generating and communicating accounting information in financial statements
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financial accounting
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mechanical and repetitive process of recording financial transactions and keeping financial records
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bookkeeping
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protects investing public by regulating the issuing, buying, and selling of stocks in U.S.
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securities and exchange commision
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-What is measured?
-When should measurement be made? -What value should be placed on the item being measured? -How should what is measured be classified? |
Basic Accounting Questions
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economic events that affect a business's financial position
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business transaction
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purchase, sale, payment, collection, or loan
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exchange of value
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physical wear and tear on machinery, losses due to fire or theft
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nonexchange of value
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unincorporated business owned by one person
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sole proprietorship
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unincorporated business owned by two or more people
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partnership
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business unit chartered by the state and legally seperate from its owners (the stockholders)
- enables companies to amass large amounts of capital - stockholders are at risk of loss only to the extent of the investment, and ownership can be transferred without affecting operations |
corporation
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distributions of earnings to stockholders
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dividends
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Assets = Liabilities + Stockholder's Equity
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Accounting Equation
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economic resource of a business that are expected to benefit future operations
ex. cash, accounts receivable, inventory, buildings, equipment, patents, copyrights |
Assets
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business's present obligations to pay cash, transfer assets, or provide services to other entities in future
ex. $ owed to bank, amounts owed to creditors for goods bought on credit, taxes owed to government |
Liabilities
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claims by owners of a corporation to the assets of a business
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stockholder's equity
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accumulation of profits and losses of a company since its inception, less total dividends declared
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retained earnings
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revenues & expenses
-measure business's success or failure in achieving profitability |
income statement
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changes in retained earnings in accounting period
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statement of retained earnings
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financial position of a business as of a certain date
-resources of business=assets -debts of a business=liabilities -owner's financial interest in business=stockholder's equity |
balance sheet
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discloses the cash flows that result from the business's operating, investing, and financial activities during the accounting period
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statement of cash flows
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conventions, rules, and procedures that constitute acceptable accounting practice at a given time.
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GAAP generally accepted accounting principle
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