Accounting for Decision Makers - C213

Accounting for Decision Makers - C213 5.0 (1 review) Students also studied Terms in this set (222) Western Governors UniversityC 213 Save WGU C213 Final Exam Teacher 73 terms zhanleonPreview WGU C214 Concepts Only Multi Cho...Teacher 222 terms Lydia_Smith75 Preview WGU C213 Accounting for Decision ...82 terms Cait_Blankenship Preview WGU C 222 term ctca AccountingA system of providing "quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions." American Institute of Certified Public Accountants

(AICPA)

The professional organization of certified public accountants in the United States.Balance SheetDocument which reports the resources of a company (the assets), the company's obligations (the liabilities), and the owners' equity, which represents how much money has been invested in the company by its owners.BookkeepingThe preservation of a systematic, quantitative record of an activity.Certified Public AccountantA person who has taken a minimum number of college-level accounting classes, has passed the dreaded CPA exam, and has met other requirements set by his or her state.Financial AccountingThe name given to accounting information provided for and used by external users.Financial Accounting Standards Board (FASB)Governmental body that sets accounting standards in the United States.Financial StatementsThe three primary financial information documents: the balance sheet, income statement, and statement of cash flows.Income StatementThis document reports the amount of net income earned by a company during a period, with annual and quarterly income statements being the most common.Internal Revenue Service (IRS)The government agency responsible for tax collection and tax law enforcement.

International Accounting Standards Board (IASB) An independent, international body formed to develop worldwide accounting standards.International Financial Reporting Standards (IFRS) The accounting standards produced by the IASB.Managerial AccountingThe name given to accounting systems designed for internal users.Public Company Accounting Oversight Board (PCAOB) A private, non-profit organization that effectively serves as an arm of the SEC in registering, inspecting, and disciplining the auditors of all publicly traded companies.Statement of Cash FlowsThis document reports the amount of cash collected and paid out by a company

in the following three types of activities: operating, investing, and financing

Accounting EquationAssets = Liabilities + Owners' Equity Accumulated Other Comprehensive IncomeThe source of these increased assets AssetsAssets are the firm's economic resources, formally defined as "probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events Balance SheetA statement of financial position shows the financial resources the company owns or controls and the claims on those resources Book ValueThe book value of an asset is the asset's cost minus the asset's accumulated depreciation.ComparabilityTnformation that becomes much more useful when it can be related to a benchmark or standard Conservatisma pervasive factor in accounting, can be summarized as follows: When in doubt, recognize all losses but don't recognize any gains.ConsistencyThe consistency principle states that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods.Disclosure Earnings Per Share (EPS)EPS tells the owner of one share of stock what he or she really wants to know Entity ConceptThe idea that personal financial activity is kept separate from business financial activity ExpensesThe amount of assets consumed from the performance of business operations and thus are the opposite of revenues External Auditaudit conducted by external (independent) qualified accountant(s)

Financing ActivitiesThose activities whereby cash is obtained from, or repaid to, owners and creditors GainsRefers to money made on activities outside the normal business of a company Going Concern Assumptionallows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments.Historical Cost ConventionAn accounting technique that values an asset for balance sheet purposes at the price paid for the asset at the time of its acquisition Income StatementA company's financial performance for a specified period of time.Investing ActivitiesThe purchase and sale of land, buildings, and equipment. Investing activities also include buying and selling stocks of other companies Liabilitiesthe future sacrifices of economic benefits that the entity is presently obliged to make to other entities as a result of past transactions or other past events Liquidity,the ease with which the item can be turned into cash LossesRefers to money lost on activities outside the normal business of a company Materialitythe question of whether an item is large enough to make any difference to anyone Net Assetstotal assets minus total liabilities. In a sole proprietorship the amount of net assets is reported as owner's equity. In a corporation the amount of net assets is reported as stockholders' equity.Net Lossthe difference between revenues and expenses. If revenues exceed expenses, net income results. If, on the other hand, expenses exceed revenues, there will be a net loss Notes to Financial StatementsThese provide additional information pertaining to a company's operations and financial position and are considered to be an integral part of the financial statements.Operating ActivitiesThose activities involved in producing and selling goods and services and thus comprise the day-to-day business of a company Owners' Equityportion of the assets that the owners of the organization can really call their own Paid-in CapitalThe value of the assets given in exchange for shares of stock.Recognition RelevanceA qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.

ReliabilityA qualitative characteristic in accounting. It is achieved when information is verifiable, objective (not subjective) and you can depend on it.Retained EarningsRepresent the portion of stockholders' equity (resulting from cumulative profitable operations) that has not been paid to the owners as dividends RevenueThe amount of assets created through the performance of business operations Revenue Recognitiona cornerstone of accrual accounting together with matching principle. They both determine the accounting period, in which revenues and expenses are recognized.Statement of Cash FlowsIndividual cash flow items that are classified according to three main activities: operating, investing, and financing.Stockholders' EquityThe portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings Time Period ConceptThe time period principle is the concept that a business should report the financial results of its activities over a standard time period, which is usually monthly, quarterly, or annually.Treasury StockShown as a subtraction in the stockholders' equity section of the balance sheet Asset TurnoverSales divided by assets and is interpreted as the number of dollars in sales generated by each dollar of assets.Assets-to-equity RatioAssets divided by equity and is interpreted as the number of dollars of assets acquired for each dollar invested by stockholders.Average Collection PeriodShows the average number of days that elapse between sale and cash collection.Cash Flow Adequacy RatioCash from operations divided by expenditures for fixed asset additions and acquisitions of new businesses Cash Times Interest Earned RatioA financial analysis tool that indicates the interest payment ability of an entity Common-size Financial StatementsAll amounts for a given year being shown as a percentage of that denominator for the year.Current RatioA comparison of current assets (cash, receivables, and inventory) with current liabilities. It is computed by dividing total current assets by total current liabilities.Debt RatioA frequently used measure of leverage, computed as total liabilities divided by total assets.Debt-to-equity RatioTotal liabilities divided by total equity and is interpreted as the number of dollars of borrowing for each dollar of equity investment