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63 Cards in this Set
- Front
- Back
Business
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All of the activities necessary to provide the members of an economic system with goods and services
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A department store is an example of a
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retailer
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An airline is an example of a
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service provider
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Business entity
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An organization operated to earn a profit
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Sole proprietorship
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A form of organization with a single owner
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Economic entity concept
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The assumption that a single, identifiable unit must be accounted for in all situations
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Partnership
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A business owned by two or more individuals; the organization form often used by accounting firms and law firms
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Corporation
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A form of entity organized under the laws of a particular state; ownership evidenced by shares of stock
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Share of stock
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A certificate that acts as evidence of ownership in a corporation
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Bond
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A certificate that represents a corporation's promise to repay a certain amount of money and interest in the future
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Nonbusiness entity
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An organization operated for some purpose other than to earn a profit
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Liability
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An obligation of a business
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Capital stock
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Indicates the owners' contributions to a corporation
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Stockholder
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One of the owners of a corporation
(shareholder) |
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Creditor
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Someone to whom a company or person has a debt
(lender) |
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Asset
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A future economic benefit
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Revenue
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An inflow of assets resulting from the sale of goods and services
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Expense
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An outflow of assets resulting from the sale of goods and services
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Accounting
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The process of identifying, measuring, and communicating economic information to various users
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Management accounting
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The branch of accounting concerned with providing management with information to facilitate the planning and control functions
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Financial accounting
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The branch of accounting involving communication with outsiders through financial statements
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Owners' equity
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The owners' claims to the assets of an entity
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Stockholders' equity
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The owner's equity of a corporation
(shareholders' equity) |
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Retained earnings
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The part of owners' equity that represents the income earned less dividends paid over the life of and entity
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Balance sheet
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The financial statement that summarizes the assets, liabilities, and owners' equity at a specific point in time
(statement of financial position) (snapshot of financial position) (Assets=Liabilities+Stockholders' or Owners' Equity) |
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Income statement
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A statement that summarizes revenues and expenses for a period of time
(statement of income or statement of operations) (Revenue-Expenses=Net Income) |
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Net income
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The excess of revenues over expenses
(profits or earnings) |
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Dividends
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A distribution of the net income of a business to its stockholders
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Statement of retained earnings
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The statement that summarizes the income earned and dividends paid over the life of a business
(Beginning retained earnings+Net income over period-Dividends over period= Ending retained earnings) |
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Statement of cash flows
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The financial statement that summarizes a company's cash receipts and cash payments during the period from operating, investing, and financing activities
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Cost principle
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Assets are recorded and reported at the cost paid to acquire them
(original cost or historical cost) |
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Going concern
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The assumption that an entity is not in the process of liquidation and that it will continue indefinitly
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Monetary unit
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The yardstick used to measure amounts in financial statements; the dollar in the United States
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Time period
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A length of time on the calendar used as the basis for preparing financial statements
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Generally accepted accounting procedures (GAAP)
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The various methods, rules, practices, and other procedures that have evolved over time in response to the need to regulate the preparation of financial statements
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Securities and Exchange Commission (SEC)
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The federal agency with ultimate authority to determine the rules for preparing statements for companies whose stock is sold to the public
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Financial Accounting Standards Board (FASB)
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The group in the private sector with the authority to set accounting standards
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American Institute of Certified Public Accountants (AICPA)
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The professional organization for certified public accountants
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Certified Public Accountant (CPA)
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The designation for an individual who has passed a uniform exam administered by the AICPA and has met other requirements as determined by individual states
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Public Company Accounting Oversight Board (PCAOB)
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A five member body created by an act of Congress in 2002 to set auditing standards
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International Accounting Standards Board (IASB)
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The organization to develop worldwide accounting standards
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Auditing
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The process of examining the financial statements and the underlying records of a company to render an opinion as to whether the statements are fairly presented
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Sarbanes-Oxley Act
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An act of Congress in 2002 intended to bring reform to corporate accountability and stewardship in the wake of a number of major corporate scandals
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Kellogg's is organized as which of the following business entities?
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Corporation
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One of the advantages of the corporate form of organization is
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The ease of transfer of ownership, the limited liability of the stockholder, and the ability to raise large amounts of capital in a relatively brief period of time
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Capital stock as a form of financing differs from borrowing because
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Stock does not have a due date
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Which of the following is not an asset?
Accounts payable Cash Accounts receivable Building |
Accounts payable
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The inflow of assets resulting from the sale of products and services is called a(n)
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Revenue
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Which of the following groups is not an external user of accounting information?
Stockholders Bankers Management |
Management
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The branch of accounting that involves communication with outsiders through financial statements is
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Financial accounting
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Which of the following financial statements summarizes the financial position of a company at a point in time?
Income statement Balance sheet Statement of retained earnings Statement of cash flows |
Balance sheet
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On a statement of retained earnings, how are net income and dividends treated?
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Net income is added, and dividends are deducted
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Revenues are reported on which of the following financial statements?
Balance sheet only income statement only both balance sheet and the income statement neither balance sheet or income statement |
Income statement only
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You decide to form a partnership with a friend. Which accounting concept requires that you separate your personal affairs from those of the partnership?
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Economic entity
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How do accountants justify reporting assets on a balance sheet at their historical cost?
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Cost is more objective than market value
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Which of the following groups currently sets U.S. accounting standards?
American Institute of Certified Public Accountants Financial Accounting Standards Board Public Company Accounting Oversight Board International Accounting Standards Board |
Financial Accounting Standards Board
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Who ultimately has responsibility for a company's financial statements?
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Management
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For accounting information to be useful in making informed decisions, it must be
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Both relevant and a faithful representation
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The first step in the ethical decision-making model presented in this section is to
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Recognize an ethical dilemma
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Internal and External Users of Accounting Information
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Current and potential owners, suppliers, trade associations, bankers, internal users-management, government agencies, creditors, financial analysts
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The accounting equation
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Assets = Liabilities + Owners' or Stockholders' Equity
(Economic Resources = Creditors' Claim to Assets + Owners' Claim to Assets) |
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Financial Statement Assumptions
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Economic Entity Concept
Going Concern Time Period Assumption Cost Principle Monetary Unit |
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Ethics in Accounting
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Identification of Ethical Dilemma
Analysis of Key Elements Determine the Alternatives Resolve by Selecting Ethical Alternative |