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Accounting Chapter 1-3
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- 1the process of identifying, measuring, recording, and communicating, financial information about a company's business activities so that the decision makers can make informed decisionsaccounting
- 2information that satisfies the needs of external decision makersfinancial accounting
- 3an unincorporated business owned by one personsole proprietorship
- 4business owned jointly by two or more individuals or corporationspartnership
- 5business organized under the laws of a particular province of Canada, owned by one or more persons called shareholderscorporation
- 6what is the obligation to pay a creditor called?a liability
- 7detailed transactions are summarized and re-posted in a set of standardized reportsfinancial statements
- 8four basic financial statements1. statement of financial position
2. income statement
3. statement of changes in shareholder's equity
4. statement of cash flows - 9reports the resources owned by a company and the claims against those resourcesstatement of financial position
- 10reports how well a company has performed its operationsincome statement
- 11reports how much of the company's income was retained in the businessstatement of changes in shareholder's equity
- 12reports the sources and uses of a company's cashstatement of cash flows
- 13a simple and orderly process, based on a series of steps and conventionsaccounting cycle
- 14flows logically from the fundamental objective of financial reporting to provide information that is usefulconceptual framework
- 15two fundamental characteristics that useful information should possess1. relevance: relevant if it is capable of making a difference in a business decision
2. faithful representation: real-world economic event, complete - 16four enhancing characteristics are complimentary to fundamental characteristics1. comparability: allows external users to identify similarities
2. verifiability: verifiable when independent parties can reach a consensus
3. timeliness: available to users asap
4. understandability: users can comprehend - 17the benefit received from accounting information should be greater than the cost of providing that informationcost constraint
- 18assumptions1. separate entity assumption
2. continuity
3. periodicity or time period assumption
4. unit of measure or monetary unit assumption - 19general approaches that are used in the measurement and recording of business activitiesprinciples
- 20four basic principels1. historical cost principle
2. revenue recognition principle
3. full discloser principle
4. prudence principle - 21elements of the financial statements (3)1. assets
2. liabilities
3. equity - 22result from exchanges between the company and another entity outside of the companyexternal events
- 23result from the company's own actionsinternal events
- 24results from an economic event that causes one of the elements of the financial statements to changeaccounting transaction
- 257 steps1. analyze transactions
2. journalize transactions
3. post to ledger
4. prepare a trial balance
5. adjusting accounts + trial balance
7. closing the accounts + closing trial balance - 26a method of accounting in which revenue is recorded when cash is receievedcash-basis accounting
- 27an alternative to cash-basis accounting, transactions recorded when they occuraccrual-basis accounting
- 28journal entries made at the end of an accounting period to record the completed portion of partially completed transactionsadjusting entries
- 29previously unrecorded revenues that have been earned but for which no cash has yet been receivedaccrued revenues
- 30previously unrecorded expenses that have been incurred but not yet paid in cashaccrued expenses
- 31transactions for which a company has received cash but has not yet earned the revenueunearned revenue
- 32asset arising from the payment of cash that has not been used or consumed by the end of the periodprepaid expense
- 33accounts that have a balance that is opposite of the balance in a related accountcontra account
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- Fichas sobre Accounting Chapter 1-3, creado por christinasollazz el 03/04/2015.
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