Conceptual Framework
Requires a company to record the expenses it incurs to generate the revenue reported.
What is the Expense Recognition Principle (aka Matching Principle)?
Resources a company owns or controls that are expected to yield future benefits.
What are assets?
Reports a company’s revenues and expenses and the resulting net income or loss over a period of time.
What is the Income Statement?
Authoritative guidelines including concepts and rules that govern financial accounting practice.
What are Generally Accepted Accounting Principles (GAAP)?
Mathematical formula that depicts the relationship of assets, liabilities, and equity.
What is the Accounting Equation?
Assumes that the life of a company can be divided into time periods such as months and years and that useful reports can be prepared for those periods.
What is the time period-assumption (aka periodicity assumption)?
Creditor's claims on assets.
What are liabilities?
The financial statement with a structure that is similar to the accounting equation.
What is the Balance Sheet?
The private organization responsible for establishing the standards for financial accounting and reporting in the U.S.
What is the Financial Accounting Standards Board (FASB)?
Beliefs that distinguish right from wrong.
What are Ethics?
Requires a company to report the details behind its financial statements that would impact users’ decisions.
What is the Full-Disclosure Principle?
Owner's claims on assets.
What is Equity?
Identifies cash inflows (receipts) and cash outflows (payments) over a period of time.
What is the Statement of Cash Flows?
Procedures to protect assets, ensure reliable accounting, promote efficiency, and uphold company policies.
What are internal controls?
The type of accounting concerned with providing useful financial information about a business to help EXTERNAL parties make informed decisions.
What is Financial Accounting?
Requires revenue to be recorded when goods and/or services are delivered to customers.
What is the Revenue Recognition Principle?
Decreases in equity from the cost of providing products and services to customers.
What are Expenses?
Reports changes in owner’s equity from net income (or loss) and from any owner contributions or withdrawals over a period of time.
What is the Statement of Owner's Equity?
The government body responsible for regulating the financial reporting practices of publicly traded companies in the U.S.
What is the Securities and Exchange Commission (SEC)?
A model for explaining the factors that cause someone to engage in fraudulent (i.e., unethical) behavior.
What is the Fraud Triangle?
Assumes that the business will continue operating instead of being closed or sold.
What is the Going-Concern Assumption?
Increases in equity from the sale of products or services to customers.
What are Revenues?
The only financial statement that reports a snapshot of a company's financial position at a specific point in time.
What is the Balance Sheet?
Provides the theoretical foundation for the development of new accounting standards and the revision of previously issued accounting standards.
What is the Conceptual Framework?
A profitability measure useful in evaluating management, analyzing and forecasting profits, and planning activities.
What is a Return on Assets?