f/a ch1 terms

  1. Accounting records
    • The accounting system (usually computerized) in which financial transactions
    • are recorded and stored.
  2. Accounting Standards Board (AcSB)
    The CICA committee that sets accounting standards in Canada.
  3. Adverse opinion
    Synonym for qualified opinion.
  4. Amortization
    • The expense taken each period based on the use of a non-current asset, such
    • as equipment. Amortization is the process that uses a systematic and rational
    • method to allocate the cost of a non-current asset to each of the years of its
    • useful life.
  5. Annual report
    • An annual document prepared and published by a corporation in which it
    • reports on its business activities during the year. The report includes the
    • corporation's annual financial statements.
  6. Assets
    • Elements of the balance sheet that have probable future benefits that can be
    • measured, are owned or controlled by the company, and are the result of a past
    • transaction.
  7. Auditors
    • A professionally trained accountant who examines a company's accounting
    • records and financial statements to determine whether they fairly present the
    • company's financial position and operating results in accordance with GAAP.
  8. Balance sheet
    • A financial statement showing a company's asset, liability, and
    • shareholders' equity account balances at a specific point in time.
  9. Basic accounting equation
    • The equation that describes the relationship between assets, liabilities,
    • and shareholders' equity. It is as follows: Assets = Liabilities +
    • Shareholders' Equity.
  10. Benefit vs. cost constraint
    • A constraint that states that the cost of implementing a new accounting
    • standard should be less than the benefits that will be derived.
  11. Board of directors
    • The governing body of a company elected by the shareholders to represent
    • their ownership interests.
  12. Capital stock
    Synonym for share capital.
  13. Cash flow statement
    • A financial statement that shows the cash flows of a company during the
    • accounting period, categorized into operating, investing, and financing
    • activities.
  14. Classified balance sheet
    • A balance sheet in which the assets and liabilities are listed in liquidity
    • order and are categorized into current and non-current sections.
  15. Clean opinion
    Synonym for unqualified opinion.
  16. Common shares
    • The shares a company issues to its owners. Shares represent the ownership
    • interest in a company.
  17. Comparability
    • A quality of accounting information that improves the ability of financial
    • statement readers to compare different sets of financial statements.
  18. Conceptual framework
    • The framework set out in the CICA Handbook to guide the AcSB as it
    • sets new accounting standards.
  19. Conservatism
    • A quality of accounting information stating that when estimates are made in
    • financial statements, they should err on the side of understating rather than
    • overstating net assets and net income.
  20. Consolidated financial statements
    • Financial statements that represent the combined financial results of a
    • parent company and its subsidiaries.
  21. Cost accounting
    • A branch of accounting that studies how cost information is used internally
    • within the company.
  22. Creditors
    Individuals or entities that are owed something by the company.
  23. Current
    • For assets, current means that the asset will be turned into cash or
    • consumed in the next year or operating cycle of a company. For liabilities,
    • current means that the liability will require the use of cash or the rendering
    • of a service, or will be replaced by another current liability, within the next
    • year or operating cycle of the company.
  24. Dividends
    • Payments made to shareholders that represent a return on their investment in
    • a company. Dividends are paid only after they are declared by the board of
    • directors.
  25. Earnings
    Synonym for net income.
  26. Earnings per share
    • A ratio calculated by dividing the earnings for the period by the average
    • number of shares outstanding during the period.
  27. Entity
    The business reported by the financial statements, usually a company.
  28. Equity
    • A term sometimes used to describe the sum of liabilities and shareholders'
    • equity. It is also sometimes used to refer simply to the shareholders' equity
    • section, which can lead to some confusion in its use.
  29. Expenses
    • The resources used in the production of revenues by a company, representing
    • decreases in the share-holders' wealth.
  30. Feedback value
    • A quality of accounting information that gives it relevance to decision-makers.
    • The information provides feedback on previous decisions.
  31. Financial accounting
    • The study of the accounting concepts and principles used to prepare
    • financial statements for external users.
  32. Financial Accounting Standards Board (FASB)
    The regulatory body that sets accounting standards in the United States.
  33. Financial statements
    • Reports from the management of a company to its owners summarizing how the
    • company performed during a particular period. Specific financial statements are
    • the balance sheet, the income statement, and the statement of cash flows.
  34. Financing activities
    • A company's activities in which funds are raised to support the other
    • activities of the company. The two major ways to raise funds are to issue new
    • shares or borrow money.
  35. Flow statement
    • A statement that describes certain types of company inflows and outflows.
    • The cash flow statement and the income statement are both examples of this type
    • of statement.
  36. Funds
    • Resources, usually money, that the company obtains and uses to purchase
    • assets or conduct operations.
  37. GAAP
    • Generally accepted accounting principles. The set of accounting
    • recommendations and guidelines that corporations use in measuring, recording,
    • and reporting financial accounting information.
  38. Income statement
    • A financial statement that measures the results of a company's operating
    • activities over a period of time, in terms of profitability.
  39. Investing activities
    • Company activities involved in long-term investments, primarily investments
    • in property, plant, and equipment, and in the shares of other companies.
  40. Investors
    Individuals or entities that acquire shares of a company as an investment.
  41. Liabilities
    • An element of the balance sheet characterized by a probable future sacrifice
    • of a company's resources.
  42. Liquidity
    The length of time required to turn assets into cash.
  43. Management
    The individuals responsible for running or managing the company.
  44. Managerial accounting
    • The study of the preparation and uses of accounting information by a
    • company's management.
  45. Market value
    The amount that the item would generate if it were sold.
  46. Materiality
    • A concept used to indicate items that will affect decision-making. In
    • auditing, it means those items that are large enough to have a significant
    • effect on the evaluation of a company's financial results.
  47. Net income
    • The profits generated by a company during a specified time period. Net
    • income is determined by subtracting expenses from a company's revenues.
  48. Neutrality
    • A quality of accounting information indicating that the methods or
    • principles applied do not depend on a company's self-interest being measured
    • but are unbiased regarding the potential outcomes for the company.
  49. Non-current
    Assets or liabilities whose lives extend beyond one year or operating cycle.
  50. Operating activities
    • A company's activities that involve the sale of goods and services to
    • customers.
  51. Operating cycle
    • The time period between the initial investment of cash in products or
    • services and the return of cash from the sale of the products or services.
  52. Owners
    Synonym for shareholders.
  53. Predictive value
    • A quality of accounting information that makes the information relevant to
    • decision-makers. Its relevance stems from its ability to predict the future.
  54. Privately held corporations
    • A company whose shares are held by a few individuals; they do not trade in a
    • public stock market.
  55. Publicly traded corporations
    A company whose shares are traded in a public stock market.
  56. Qualified
    • An audit opinion that expresses some exception to the fair presentation of
    • the financial results.
  57. Relevance
    • A quality of accounting information indicating that the information should
    • have an impact on the user's decisions.
  58. Reliability
    • A quality of accounting information indicating that the information can be
    • depended on with respect to verifiability, representational faithfulness,
    • neutrality, and conservatism.
  59. Representational faithfulness
    • A quality of accounting information indicating that the information should
    • accurately represent the attribute or characteristic that it purports to
    • represent.
  60. Retained earnings
    • Earnings that are kept within the company and not paid out to shareholders
    • in the form of dividends.
  61. Revenues
    • Inflows of resources to the company that result from the sale of goods
    • and/or services.
  62. Sarbanes-Oxley Act
    • An act passed by the United States Congress in 2002 that established new
    • standards for corporate boards, management, and accounting firms.
  63. Share capital
    • The shares issued by a company to its owners. Shares represent the ownership
    • interest in the company.
  64. Shareholders
    The individuals or entities that own shares in a company.
  65. Shareholders' equity
    • The section of the balance sheet that represents the shareholders' wealth;
    • it is equivalent to the assets less the liabilities.
  66. Statement of cash flows
    Synonym for cash flow statement.
  67. Statement of changes in financial position
    Synonym for cash flow statement.
  68. Statement of earnings
    Synonym for income statement.
  69. Statement of financial position
    Synonym for balance sheet.
  70. Taxing authority
    An agency that assesses and collects taxes from a company.
  71. Timeliness
    • A quality of accounting information indicating that information must be
    • current in order to be relevant to decision-makers.
  72. Unclassified balance sheet
    • A balance sheet that does not classify assets and liabilities into current
    • and non-current categories.
  73. Understandability
    • A quality of accounting information indicating that it should be prepared
    • with sufficient information and in a format that enables users to comprehend
    • the contents.
  74. Unqualified opinion
    • An audit opinion that states that the financial statements present fairly
    • the company's financial position and operating results in conformity with GAAP.
  75. Verifiability
    • The characteristic of accounting information that states that independent
    • measurers, using the same methods, would agree on the calculated amount for an
    • item.
Card Set
f/a ch1 terms
terms to study