Accounting Chapter 1

  1. Measurement Principle
    Accounting info is based on cost with potential subsequent adjustments to fair value.
  2. Monetary Unit Assumption
    Assumes transactions and events can be expressed in monetary units.
  3. Expense Recognition Principle (Matching Principle)
    Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses.
  4. Cost Principle
    Prescribes financial statements info to be based on actual costs incurred in business transactions.
  5. Business Entity Assumption
    Requires a business to be accounted for separately from its owner and from any other entity.
  6. Business Types
    Sole Propreitorship- Owned by one person

    Partnership- Owned by 2 or more people

    Corporation- A business legally separate from its owners. Its responsible for its own acts and debts.
  7. Financial Accounting
    Area of accounting aimed mainly at serving external users.
  8. Revenue Recognition Principle
    Prescribes that revenue is recognized when earned.
  9. Time Period Assumption
    An organization's activities can be divided into specific time periods such as months, quarters, or years.
  10. Full Disclosure Principle
    Prescribes that a company report details behind financial statements that would impact user's decision.
  11. Going-concern Principle
    Accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
  12. Assets
    Resources a company owns or controls.
  13. Liabilities
    What a company owes its nonowners (creditors) in future payments, products, or services.
  14. Equity
    The claims of its owner(s).
  15. Revenues
    Sales of products or services to customers.
  16. Expenses
    The costs necessary to earn revenues. Expenses decrease equity.
  17. Owner's Capital
    Showing the owner’s claim on company assets; equals owner investments plus net income (or less net losses) minus owner withdrawals since the company’s inception; also referred to as equity..
  18. Owner Investments
    Assets an owner puts into the company and are included under the generic account Owner, CapitalAccount.
  19. Income Statement (1)
    A company’s revenues and expenses along with the resulting net income or loss over a period of time due to earnings activities.

    Includes net income.
  20. Statement of owner's equity (2)
    Changes in equity from net income (or loss) and from any owner investments and withdrawals over a period of time.

    Includes capital, investments, net income, and withdrawal.
  21. Balance Sheet (3)
    A company’s financial position (types and amounts of assets, liabilities, and equity) at a point in time.

    • Assets- cash, supplies, and equipment
    • Liabilities- Accounts payable
    • Equity- Capital
  22. State of Cash Flows (4)
    Cash inflows (receipts) and cash outflows (payments) over a period of time.
Card Set
Accounting Chapter 1