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33 Cards in this Set
- Front
- Back
provides relevant financial information to various external users. |
Financial accounting |
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process of providing financial statement information to external users |
Financial reporting |
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Obligation to transfer cash or other resources as a result of a past transaction. |
liability |
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Dividends paid by a corporation to its shareholders. |
distribution |
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Inflow of an asset from providing a good or service. |
revenue |
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The financial position of a company. |
balance sheet |
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Increase in equity during a period from non-owner transactions. |
comprehensive income |
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Increase in equity from peripheral or incidental transaction. |
gain |
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Sale of an asset used in the operations of a business for less than the asset's book value. |
loss |
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The owner's residual interest in the assets of a company. |
equity |
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An item owned by the company representing probably future benefits |
asset |
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Revenues plus gains less expenses and losses |
income statement |
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An owner's contribution of cash to a corporation in exchange for ownership shares of stock. |
capital investment |
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Outflow of an asset related to the production of revenue |
expense |
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Information is useful in predicting the future |
predictive value |
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Pertinent to the decision at hand |
relevance |
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Information is available prior to the decision |
timeliness |
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Decreases in equity resulting from transfers to owners |
Distribution to owners |
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information confirms expectations |
Confirmatory value |
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Users understand the information in the context of the decision being made |
Understandability |
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Results if an asset is sold for more than its book value |
Gain |
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Agreement between a measure and the phenomenon it purports to represent |
Faithful representation |
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The change in equity from nonowner transactions |
Comprehensive income |
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Concerns the relative size of an item and its effect on decisions |
Materiality |
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Important for making interfirm comparisons |
Comparibility |
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The absence of bias |
Neutrality |
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The process of admitting information into financial statements |
Recognition |
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Applying the same accounting practices over time |
Consistency |
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Requires consideration of the costs and value of information |
Cost effectiveness |
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Implies consensus amount different measures |
Verifiability |
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Types of adjustments (4) |
Prepayments (adjusting what has already been recorded): prepaid expenses: affects expenses & assets(IS & BS) Unearned revenue: affects liabilities & revenues (BS & IS) Accrued revenue: affects assets & revenue (BS & IS) Accrued expenses: affects liabilities & expenses (BS & IS) All involved adjustments to a balance sheet account and income statement |
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Normal debit balance accounts: |
assets & expenses |
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Normal credit balances: |
liabilities, equity, revenues |