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| Accounting | Information and measurement system that identifies, records, and communicates relevant information about a company's business activities. |
| Accounting Equation | Equality involving a company's assets, liabilities, and equity: Assets = Liabilities + Equity; also called balance sheet equation. |
| Assets | Resources a business owns or controls that are expected to provide current and future benefits to the business. |
| Audit | Analysis and report of an organization's accounting system, its records, and its reports using various tests. |
| Balance Sheet | Financial statement that lists types and dollar amounts of assets, liabilities, and equity at a specific date. |
| Bookkeeping | Part of accounting that involves recording transactions and events, either manually or electronically; also called bookkeeping. |
| Business Entity Principle | Principle that requires a business to be accounted for separately from its owner(s) and from any other entity |
| Common Stock | Corporation's basic ownership share; also called capital stock. |
| Contributed Capital | Total amount of cash and other assets received from stockholders in exchange for stock; also called paid-in capital. |
| Corporation | Business that is a separate legal entity under state or federal laws with owners called shareholders or stockholders. |
| Cost Principle | Accounting principle that requires financial statement information to be based on actual costs incurred in business transactions. |
| Dividends | Corporation's distributions of assets to its owners. |
| Equity | Owner's claim on the assets of a business; equals the residual interest in an entity's assets after deducting liabilities; also called net assets. |
| Ethics | Codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest. |
| Events | Happenings that both affect an organization's financial position and can be reliably measured. |
| Expanded Accounting Equation | Assets = Liabilities + Equity where Equity equals [Owner capital - Owner withdrawals + Revenues - Expenses]. |
| Expenses | Outflows or using up of assets as part of operations of a business to generate sales. |
| External Transactions | Exchanges of economic value between one entity and another entity. |
| External Users | Persons using accounting information who are not directly involved in running the organization. |
| Financial Accounting | Area of accounting mainly aimed at serving external users. |
| Financial Accounting Standards Board (FASB) | Independent group of full-time members responsible for setting accounting rules. |
| Generally Accepted Accounting Principles (GAAP) | Rules that specify acceptable accounting practices. |
| Going-Concern Principle | Principle that requires financial statements to reflect the assumption that the business will continue operating. |
| Income | Amount earned after subtracting all expenses necessary for and matched with sales for a period; also called income, profit, or earnings. |
| Income Statement | Financial statement that subtracts expenses from revenues to yield a net income or loss over a specified period of time; also includes any gains or losses. |
| Internal Transactions | Activities within an organization that can affect the accounting equation. |
| Internal Users | Persons using accounting information who are directly involved in managing the organization. |
| International Accounting Standards Board (IASB) | Group that identifies preferred accounting practices and encourages global acceptance; issues International Financial Reporting Standards (IFRS). |
| Liabilities | Creditors' claims on an organization's assets; involves a probable future payment of assets or services that a company is obligated to make due to past transactions or events. |
| Managerial Accounting | Area of accounting mainly aimed at serving the decision-making needs of internal users; also called management accounting. |
| Monetary Unit Principle | Principle that assumes transactions and events can be expressed in money units. |
| Net Assets | Owner's claim on the assets of a business; equals the residual interest in an entity's assets after deducting liabilities; also called net assets. |
| Net Income | Amount earned after subtracting all expenses necessary for and matched with sales for a period; also called income, profit, or earnings. |
| Net Loss | Excess of expenses over revenues for a period. |
| Objectivity Principle | Principle that prescribes independent, unbiased evidence to support financial statement information. |
| Partnership | Unincorporated association of two or more persons to pursue a business for profit as co-owners. |
| Proprietorship | Business owned by one person that is not organized as a corporation; also called proprietorship. |
| Recordkeeping | Part of accounting that involves recording transactions and events, either manually or electronically; also called bookkeeping. |
| Retained Earnings | Cumulative income less cumulative losses and dividends. |
| Return | Monies received from an investment; often in percent form. |
| Return on Assets | Ratio reflecting operating efficiency; defined as net income divided by average total assets; also called return on assets or return on investment. |
| Revenues | Gross increase in equity from a company's business activities that earn income; also called sales. |
| Revenue Recognition Principle | The principle prescribing that revenue is recognized when earned. |
| Risk | Uncertainty about an expected return. |
| Securities and Exchange Commission (SEC) | Federal agency Congress has charged to set reporting rules for organizations that sell ownership shares to the public. |
| Shareholders | Owners of a corporation; also called stockholders. |
| Shares | Equity of a corporation divided into units; also called stock. |
| Sole Proprietorship | Business owned by one person that is not organized as a corporation; also called proprietorship. |
| Statement of Cash Flows | A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged by operating, investing, and financing. |
| Statement of Retained Earnings | Report of changes in retained earnings over a period; adjusted for increases (net income), for decreases (dividends and net loss), and for any prior period adjustments. |
| Stock | Equity of a corporation divided into units; also called stock. |
| Stockholders | Owners of a corporation; also called stockholders. |
