Financial Accounting Terms: A Comprehensive Glossary, Quizzes of Financial Accounting

Download Financial Accounting Terms: A Comprehensive Glossary and more Quizzes Financial Accounting in PDF only on Docsity! TERM 1 ACCOUNTING DEFINITION 1 the process of identifying, measuring, recording, and communicating financial information about a company's business activities so decision makers can make informed decisions. TERM 2 ASSETS DEFINITION 2 economic resources representing expected future economic benefits controlled by the business TERM 3 AUDIT REPORT DEFINITION 3 the auditor's opinion as to whether the company's financial statements are fairly stated in accordance with generally accepted accounting principles (GAAP) TERM 4 BALANCE SHEET DEFINITION 4 reports the resources (assets) owned by a company and the claims against those resources (liabilities and stockholder equity) at a specific point in time. TERM 5 CAPITAL DEFINITION 5 the liabilities and stockholder's equity of a company's business TERM 6 CASH FLOWS FROM FINANCING ACTIVITIES DEFINITION 6 any cash flow related to obtaining capital of the company. this includes the issuance and repayment of debt, common stock transactions, and the payment of dividends TERM 7 CASH FLOWS FROM INVESTING ACTIVITIES DEFINITION 7 any cash flow related to the acquisition or sale of investments and long-term assets such as property, plant, and equipment TERM 8 CASH FLOWS FROM OPERATING ACTIVITIES DEFINITION 8 any cash flows directly related to earning income. includes cash sales and collections of accounts receivable as well as cash payments for goods, services, salaries, and interest. TERM 9 CORPORATION DEFINITION 9 a business organized under the laws of a particular state TERM 10 CREDITOR DEFINITION 10 when a corporation borrows money from another entity such as a bank, it must repay the amount borrowed TERM 21 GROSS MARGIN (GROSS PROFIT) DEFINITION 21 the difference between net sales and cost of goods sold (or cost of sales) _______________=net sales-cost of goods sold TERM 22 INCOME FROM OPERATIOS DEFINITION 22 the difference between gross margin and operating expenses _____ = gross margin - operating expenses TERM 23 INCOME STATEMENT DEFINITION 23 reports how well a company has performed and its operations (revenues, expenses, and income) over a period of time TERM 24 CURRENT LIABILITIES DEFINITION 24 consist of obligations that will be satisfied within one year or the operating cyclesthey are typically listed in the order of which they will be paid TERM 25 INTANGIBLE ASSETS DEFINITION 25 similar to property, plant, and equipment in that they provide a benefit to a company over a number of years, however, these assets lack physical substance TERM 26 INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) DEFINITION 26 an independent, privately-funded accounting standard- setting body with the goal of developing single set of high- quality accounting standards that result in transparent and comparable information reported in general purpose financial statements TERM 27 INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) DEFINITION 27 a general term that describes an international set of generally accepted accounting standards TERM 28 LIABILITY DEFINITION 28 probable future sacrifices of economic benefits, _____ usually require the payment of cash, the transfer of assets other than cash, or the performance of services TERM 29 LIQUIDITY DEFINITION 29 the ability to pay obligations as they become due TERM 30 LONG-TERM INVESTMENTS DEFINITION 30 are similar to short-term investments, except that the company expects to hold the investment for a longer period than a year TERM 31 LONG-TERM LIABILITIES DEFINITION 31 the obligations of a company that will require payment beyond one year or the operating cycle TERM 32 MANAGEMENT'S DISCUSSION AND ANALYSIS DEFINITION 32 management provides a discussion and explanation of various items reported in the financial statements. TERM 33 NET INCOME DEFINITION 33 the difference between income from operations and any nonoperating revenues and expenses TERM 34 NET INCOME DEFINITION 34 if revenues are greater than expenses a company has earned this, a ____________ TERM 35 NET LOSS DEFINITION 35 if expenses are greater than revenues, a company has incurred a _______________ TERM 46 STOCKHOLDER'S EQUITY DEFINITION 46 the owners' claim against the assets of a corporation after all liabilities have been deducted TERM 47 WORKING CAPITAL DEFINITION 47 measure of liquidity ___________ = current assets - current liabilities TERM 48 ACCOUNT DEFINITION 48 a record of increases and decreases in each of the basic elements of the financial statements TERM 49 ACCOUNTING CYCLE DEFINITION 49 a simple and orderly process, based on a series of steps and conventions TERM 50 CHARTS OF ACCOUNTS DEFINITION 50 list of accounts used by the company TERM 51 COMPARABILITY DEFINITION 51 comparable information allows external users to identify similarities and differences between two or more items TERM 52 CONSERVATISM PRINCIPLE DEFINITION 52 states that accounts should take care to avoid overstating assets or income when they prepare financial statements TERM 53 CONSISTENCY DEFINITION 53 can be achieved by a company applying the same accounting principles for the same items over time. TERM 54 CONTINUITY (OR GOING-CONCERN) ASSUMPTION DEFINITION 54 assumes that a company will continue to operate long enough to carry out its existing commitments TERM 55 COST CONSTRAINT DEFINITION 55 the benefit received from accounting information should be greater than the cost of providing that information TERM 56 CREDIT DEFINITION 56 the right side of a T accountalternatively, it may refer to the act of entering an amount on the right side of an account TERM 57 DEBIT DEFINITION 57 the left side of the y refer to T accountit may refer to the act of entering an amount on the left side of the account TERM 58 DOUBLE-ENTRY ACCOUNTING DEFINITION 58 describes the system used by companies to record the effects of transactions on the accounting equation TERM 59 ECONOMIC ENTITY ASSUMPTION DEFINITION 59 each company is accounted for separately from its owners TERM 60 EVENTS DEFINITION 60 make up themultitudeof activities in which companies engageexternal ones result from exchange between the company and another outside entity and internal ones result from a company's own actions that do not involve other companies TERM 71 RELEVANCE DEFINITION 71 if it has the capability of making a difference in a business decision by helping users predict future events or providing feedback about prior expectations TERM 72 REVENUE RECOGNITION PRINCIPLE DEFINITION 72 used to determine when revenue is recorded and reporteddone in the period which it is earned and the collection of cash is reasonably assured TERM 73 T-ACCOUNT DEFINITION 73 one of the many ways transactions can be analyzedit gets its name from the shapeis split into debits and credits TERM 74 TIMELINESS DEFINITION 74 information is timely if it is available to users before it loses its ability to influence decisions TERM 75 TIME PERIOD ASSUMPTION DEFINITION 75 allows the life of a company to be divided into artificial time periods so net income can be measured for specific period of timewithout this assumption, a company's income could only be reported at the end of its life TERM 76 TRANSACTION DEFINITION 76 refers to any event, external or internal, that is recognized in the financial statements TERM 77 TRANSACTION ANALYSIS DEFINITION 77 the process of determining the economic effects of a transaction on the elements of the accounting equationusually begins with the gathering of source documents that describe business activities TERM 78 TRIAL BALANCE DEFINITION 78 a list of all active accounts and each account's debit or credit balanceaccounts are listed in the order they appear in the ledger----assets first, followed by liabilities, stockholder's equity, revenues, and expenses.serves as a useful tool in preparing the financial statements TERM 79 UNDERSTANDABILITY DEFINITION 79 if users who have reasonable knowledge of accounting and business can, with reasonable study effort, comprehend the meaning of information, it is considered _______________ TERM 80 VERIFIABILITY DEFINITION 80 information is ____________________ when independent parties can reach a consensus on the measurement of activitywhen multiple independent observers can reach a general consensus, there is an implication that the information faithfully represents the economic event being measured TERM 81 ACCRUAL-BASIS ACCOUNTING DEFINITION 81 an alternative to cash-basis accounting that is required by generally accepted accounting principles.transactions are recorded when they happen.superior to cash-basis because it links income measurement to selling. TERM 82 ACCRUED EXPENSES DEFINITION 82 previously recorded expenses that have been incurred but not yet paid in cash. TERM 83 ACCRUED REVENUES DEFINITION 83 companies that have earned revenue but not received the cash where companies are engaging in revenue-producing activities but are not paid until after the activities are complete TERM 84 ADJUSTED TRIAL BALANCE DEFINITION 84 after a company has journalized and posted all of the adjusting entries, it updates the trial balance to reflect the adjustments that have been made TERM 85 ADJUSTING ENTRIES DEFINITION 85 journal entries that are made at the end of an accounting period to record the completed portion of partially completed transactions TERM 96 WORKSHEET DEFINITION 96 accountants often use an informational schedule to assist them in organizing and preparing the information necessary to perform the end-of-period steps in the accounting cycle namely the preparation of adjusting entries, financial statements, and closing entries TERM 97 ACCOUNTING SYSTEM DEFINITION 97 consists of methods and records used to identify, measure, record, and communicate financial information about a business TERM 98 BANK RECONCILIATION DEFINITION 98 the process of reconciling any differences between a company's accounting records and the banks accounting records. TERM 99 BUSINESS PROCESS RISKS DEFINITION 99 threats that are directed towards the internal processes of a company TERM 100 CASH EQUIVALENTS DEFINITION 100 include amounts on deposit with financial institutions and investments, primarily held in money market accounts, with original maturities of less than 90 days. easily convertible into known amounts of cash close enough to maturity that they are relatively insensitive to changes in interest rates TERM 101 CASH OVER AND SHORT DEFINITION 101 when the amount deposited does not equal the total cash on the register tapes. TERM 102 CONTROL ACTIVITIES DEFINITION 102 policies and procedures that top management establishes to help insure that its objectives are met. TERM 103 CONTROL ENVIRONMENT DEFINITION 103 the foundation of the internal control system TERM 104 DEPOSIT IN TRANSIT DEFINITION 104 an amount received and recorded by the business, but which has not been recorded by the bank in time to appear on the current bank statement TERM 105 INTERNAL CONTROL SYSTEM DEFINITION 105 to control employee's activities, management puts in place procedures that collectively are called _______________.include all the policies and procedures established by top management and the board of directors to provide reasonable insurance that the company's objectives are being met. TERM 106 NON-SUFFICIENT FUNDS (NSF) CHECK DEFINITION 106 a check that has been returned to the depositor because funds in the issuers account are not sufficient enough to pay the check. TERM 107 OPERATING CYCLE DEFINITION 107 the elapsed time between the purchase of goods for resale (or the purchase of materials to produce salable goods or services) and the collection of cash collected from customers. TERM 108 OUTSTANDING CHECK DEFINITION 108 a check that is issued and recorded by the business that has not been "cashed" by the recipient of the check. TERM 109 PETTY CASH DEFINITION 109 a fund that is established to pay for small items and is controlled by one individual TERM 110 SAFEGUARDING DEFINITION 110 both assets and records must be secured against theft and destruction