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Accounting records
- The accounting system (usually computerized) in which financial transactions
- are recorded and stored.
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Accounting Standards Board (AcSB)
The CICA committee that sets accounting standards in Canada.
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Adverse opinion
Synonym for qualified opinion.
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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.
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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.
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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.
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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.
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Balance sheet
- A financial statement showing a company's asset, liability, and
- shareholders' equity account balances at a specific point in time.
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Basic accounting equation
- The equation that describes the relationship between assets, liabilities,
- and shareholders' equity. It is as follows: Assets = Liabilities +
- Shareholders' Equity.
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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.
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Board of directors
- The governing body of a company elected by the shareholders to represent
- their ownership interests.
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Capital stock
Synonym for share capital.
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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.
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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.
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Clean opinion
Synonym for unqualified opinion.
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Common shares
- The shares a company issues to its owners. Shares represent the ownership
- interest in a company.
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Comparability
- A quality of accounting information that improves the ability of financial
- statement readers to compare different sets of financial statements.
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Conceptual framework
- The framework set out in the CICA Handbook to guide the AcSB as it
- sets new accounting standards.
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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.
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Consolidated financial statements
- Financial statements that represent the combined financial results of a
- parent company and its subsidiaries.
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Cost accounting
- A branch of accounting that studies how cost information is used internally
- within the company.
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Creditors
Individuals or entities that are owed something by the company.
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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.
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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.
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Earnings
Synonym for net income.
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Earnings per share
- A ratio calculated by dividing the earnings for the period by the average
- number of shares outstanding during the period.
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Entity
The business reported by the financial statements, usually a company.
-
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.
-
Expenses
- The resources used in the production of revenues by a company, representing
- decreases in the share-holders' wealth.
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Feedback value
- A quality of accounting information that gives it relevance to decision-makers.
- The information provides feedback on previous decisions.
-
Financial accounting
- The study of the accounting concepts and principles used to prepare
- financial statements for external users.
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Financial Accounting Standards Board (FASB)
The regulatory body that sets accounting standards in the United States.
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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.
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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.
-
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.
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Funds
- Resources, usually money, that the company obtains and uses to purchase
- assets or conduct operations.
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GAAP
- Generally accepted accounting principles. The set of accounting
- recommendations and guidelines that corporations use in measuring, recording,
- and reporting financial accounting information.
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Income statement
- A financial statement that measures the results of a company's operating
- activities over a period of time, in terms of profitability.
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Investing activities
- Company activities involved in long-term investments, primarily investments
- in property, plant, and equipment, and in the shares of other companies.
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Investors
Individuals or entities that acquire shares of a company as an investment.
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Liabilities
- An element of the balance sheet characterized by a probable future sacrifice
- of a company's resources.
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Liquidity
The length of time required to turn assets into cash.
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Management
The individuals responsible for running or managing the company.
-
Managerial accounting
- The study of the preparation and uses of accounting information by a
- company's management.
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Market value
The amount that the item would generate if it were sold.
-
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.
-
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.
-
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.
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Non-current
Assets or liabilities whose lives extend beyond one year or operating cycle.
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Operating activities
- A company's activities that involve the sale of goods and services to
- customers.
-
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.
-
Owners
Synonym for shareholders.
-
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.
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Privately held corporations
- A company whose shares are held by a few individuals; they do not trade in a
- public stock market.
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Publicly traded corporations
A company whose shares are traded in a public stock market.
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Qualified
- An audit opinion that expresses some exception to the fair presentation of
- the financial results.
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Relevance
- A quality of accounting information indicating that the information should
- have an impact on the user's decisions.
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Reliability
- A quality of accounting information indicating that the information can be
- depended on with respect to verifiability, representational faithfulness,
- neutrality, and conservatism.
-
Representational faithfulness
- A quality of accounting information indicating that the information should
- accurately represent the attribute or characteristic that it purports to
- represent.
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Retained earnings
- Earnings that are kept within the company and not paid out to shareholders
- in the form of dividends.
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Revenues
- Inflows of resources to the company that result from the sale of goods
- and/or services.
-
Sarbanes-Oxley Act
- An act passed by the United States Congress in 2002 that established new
- standards for corporate boards, management, and accounting firms.
-
Share capital
- The shares issued by a company to its owners. Shares represent the ownership
- interest in the company.
-
Shareholders
The individuals or entities that own shares in a company.
-
Shareholders' equity
- The section of the balance sheet that represents the shareholders' wealth;
- it is equivalent to the assets less the liabilities.
-
Statement of cash flows
Synonym for cash flow statement.
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Statement of changes in financial position
Synonym for cash flow statement.
-
Statement of earnings
Synonym for income statement.
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Statement of financial position
Synonym for balance sheet.
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Taxing authority
An agency that assesses and collects taxes from a company.
-
Timeliness
- A quality of accounting information indicating that information must be
- current in order to be relevant to decision-makers.
-
Unclassified balance sheet
- A balance sheet that does not classify assets and liabilities into current
- and non-current categories.
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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.
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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.
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Verifiability
- The characteristic of accounting information that states that independent
- measurers, using the same methods, would agree on the calculated amount for an
- item.
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