Glossary – Chapter 1

• accountingA set of concepts and techniques that are used to measure and report financial information about an economic unit
• accounting equationA financial relationship at the heart of the accounting model: Assets = Liabilities + Owners' Equity
• assetsThe economic resources owned by an entity; entailing probable future benefits to the entity
• auditingThe examination of transactions and systems that underlie an organization's financial statements with the goal or reporting thereon
• balance sheetA financial statement that presents a firm's assets, liabilities, and owners' equity at a particular point in time
• CPAAn individual who is licensed by a state to practice public accounting
• certified public accountantAn individual who is licensed by a state to practice public accounting
• corporationA form of business organization where ownership is represented by divisible units called shares of stock
• dividendsAmounts paid from profits of a corporation to shareholders as a return on their investment in the stock of the entity
• expensesThe costs incurred in producing revenues
• financial accountingAn area of accounting that deals with external reporting to parties outside the firm; usually based on standardized rules and procedures
• Financial Accounting Standards BoardAn organization charged with producing standards for financial reporting in the USA
• financial statementsCore financial reports that are prepared to represent the financial position and results of operations of a company
• historical cost principleThe concept that many transactions and events are to be measured and reported at acquisition cost
• income statementA financial statement that summarizes the revenues, expenses, and results of operations for a specified period of time
• internal auditorA person within an organization who reviews and monitors the controls, procedures, and information of the organization
• International Accounting Standards BoardAn organization charged with producing accounting standards with global acceptance
• liabilitiesAmounts owed by an entity to others
• managerial accountingAn area of accounting concerned with reporting results to managers and others who are internal to an organization
• net incomeThe excess of revenues over expenses for a designated period of time
• net lossThe excess of expenses over revenues for a designated period of time
• owner investmentsResources provided to an organization by a person in exchange for a position of ownership in the organization
• owners' equityThe residual of assets minus liabilities, representing the collective interest or position of the entity's owners
• partnershipA non-corporation representing an association of two or more persons organized to carry out a business plan for a profit motive
• public accountingAccounting activities provided by a person to the general public, typically relating to audit, tax and similar services
• retained earningsThe excess of a corporation's income over its dividends
• revenueInflows and other benefits received in exchange for the providing of goods and services
• sole proprietorshipA non-corporation business owned by a sole individual
• statement of retained earningsA financial statement that discloses changes in retained earnings during a designated period of time; those changes usually attributable to income and dividends