Chapter 1-4 terms

Chapter 1-4 terms - Chapter 1 Accounts- record of...

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Chapter 1 Accounts - record of classified and summarized financial data; component of financial statement elements. 10 Accounting - service based profession developed to provide reliable and relevant financial information useful in making decisions. 3 Accounting equation- Assets= Liabilities + Equity Accounting event- Economic occurrence that changes a company’s assets, liabilities, or equity. 12 Accounting period - Time span covered by the financial statements; normally one year, but may be a quarter, a month or some other time interval. 17 Annual report - Document companies publish to provide information, including financial statements, to stockholders. 23 Articulation - Characteristic of financial statements that means they are interrelated. 17 Asset - Economic resource used to produce revenue which is expected to provide future benefit to the business .4 Asset exchange transaction - A transaction, such as the purchase of land with cash, that decreases one asset and increases another asset; total assets remain unchanged. 13, 62 Asset source transaction - A transaction that increases both an asset and a claim on assets; the 3 types of asset source transactions are acquisitions from owners (equity), borrowing from creditors (liabilities), or earnings from operations (revenues). 12, 62 Asset use transaction- A transaction that decreases both an asset and a claim on assets; the 3 types of asset use transactions are distributions (transfers to owners), liability. 14, 63 Balance sheet - Financial statement that reports a company’s assets and the corresponding claims (liabilities and equity) on those assets as of a specific date (usually as of the end of the accounting period). 19 Claims - Owners’ and creditors’ interests in a business’ assets. 11 Closing - Entries that transfer the balances in the temporary accounts (revenue expense and dividends accounts) to the retained earnings account at the end of the accounting period. 21
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Common stock - Basic class of corporate stock that has no preferential claim on assets or dividends; certificates that evidence ownership in a company. 11 Creditor - Individual organization that has loaned goods or services to a business. 4 Dividend - transfer of wealth from a business to its owners. 15 Double entry bookkeeping - recordkeeping system that provides checks and balances by recording 2 sides for every transaction. 12 Earnings - (net income) The difference between revenues and expenses. A.K.A. profit. 4 Equity - Owner’s interest in a company’s assets; secondary to creditor’s claims (i.e., Assets- Liabilities= Equity); also called residual interest or net assets. 11 Expenses - An economic sacrifice (decrease in assets or increase in liabilities) in order to produce or generate revenue. 14 Financial accounting - Branch of accounting focused on the business information needs of external users (creditors, investors, governmental agencies, financial analysts, etc.); its objective is to classify and record business events and transactions to produce external
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Chapter 1-4 terms - Chapter 1 Accounts- record of...

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