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40 Cards in this Set
- Front
- Back
GAAP
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• GAAP: “Generally accepted accounting principles” the rules the specify acceptable acc practices
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• Business Entity:
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• Business Entity: Every business is accounted for separately from its owner or owners.
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• Cost principle
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• Cost: Information is based on actual costs incurred in transactions
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• Going Concern
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• Going Concern: Financial statements reflect the assumption that the business continues operating
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• Monetary Unit
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• Monetary Unit: we can express transactions and events in monetary units.
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• Matching
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• Matching: A company records the expenses incurred to generate the revenue reported.
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• Full disclosure
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• Full disclosure: A company reports details behind financial statements that would impact users' decisions
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• Revenue recognition.
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• Revenue recognition: Revenue is recorded only when the earnings process is complete.
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• General Acc:
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• General Acc: Derived from long-used and generally accepted accounting practices
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• Specific Acc
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• Specific Acc: Usually created by a pronouncement from an authoritative body
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• Objectivity
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• Objectivity: The accounting guideline prescribing that financial statement information be supported by independent, unbiased evidence other than someone's belief or opinion
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accounting equation
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Assets = Liability + Equity
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External Transactions.
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External Transactions: Occur b/w 2 different entities and are easy to record because there are always source documents evidencing the transaction.
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Internal Transactions
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Internal Transactions: occurs within a single entity and are more difficult to record because source documents may not always be present
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Income statement
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Income statement: Revenues- expenses = net income
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Statement of Retained Earnings
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Statement of Retained Earnings: retained earnings from year before + net income – dividends= retained earnings this year.
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Balance Sheet:
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Balance Sheet:
• Add up all assets (cash, supplies, equipt). • Add up all liabilities(accounts payable) • Add up all equity( common stock, retained earnings) |
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Statement of Cashflows:
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Statement of Cashflows: debits and credits of cash.
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Return on assets
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Return on assets: ROA= net income/average total assets
• Average total assets is this years+last years/2 |
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Account
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Account: A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense
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Corporation
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Corporation: Is a legal entity separate and distinct from its owners
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Expenses
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Expenses: Decreases in retained earnings that represent costs of assets or services used to earn revenues
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Permanent accounts
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Permanent accounts: Assets, liabilities, and equity accounts are not closed; these accounts
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Contra account
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Contra account: An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account
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oppurtunities in acc
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financial, managerial, taxation,
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accounting
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the language of business
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2 most common firls of acc in practice
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managerial and financial
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IASB
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international acc standards board
hopes to create more harmony among acc practices of different countries |
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sole proprietorship
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a business owned by one person. has unlimited liability. no income tax for the business
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partnership
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business owned by 2 or more people. this is NOT legally separate from its owners.
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ledger
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record containing all accounts used by a company
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prepaid accoutns
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assets
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debt ratio
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total liabilities/total assets
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prepaid expenses
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DEFERRED- items paid for in advance of receiving their benefits
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accrued expenses
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costs that are incurred in a period but are both unpaid and unrecorded
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unearned revenues
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liabilties-cash received in advance of providing products and services
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accrued revenues
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revs earned in a period that are both unrecorded and not yet received in cash or other assets
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income summary
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a temporary account(only used for the closing process) that contains a credit for the sum of all revenues (and gains) and a debit for the sum of all expenses and loses.
its balance equals net income/loss and is transferred to retained earnings |
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profit margin
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net income/net sales
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current ratio
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current assets/current liabilties
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