Environment and theoretical structure of financial accounting
This term is defined as the "process of providing financial statement information to external users."
What is financial reporting?
The left hand side of a t-account is given this name.
What is a debit?
This term is defined as "the period of time necessary to convert cash to raw materials, raw materials to finished product, finished product to receivables, and finally receivables to cash." This period of time is used to classify assets and liabilities as either short-term or long-term.
What is the operating cycle?
These three items make up shareholders' equity.
What are paid-in-capital (common stock plus additional paid-in-capital), retained earnings, and accumulated other comprehensive income?
These are examples of users of financial statement information.
Who are (1) investors, (2) creditors (e.g., banks), (3) employees, (4) labor unions, (5) customers, (6) suppliers, (7) the IRS, (8) the SEC, (9) stock analysts, (10) stockbrokers, and (11) credit rating agencies.
This equation is referred to as the "accounting equation."
What is Assets = Liabilities + Shareholders' Equity
This term is defined as "the ability of a company to convert its assets to cash to pay its current liabilities."
What is liquidity?
This item has its own financial statement and is the summation of net income and other comprehensive income.
What is comprehensive income?
This organization is the current private sector body that has been delegated the task of setting accounting standards.
What is the Financial Accounting Standards Board (FASB)?
To increase the value of a liability, accountants need to make an entry to this side of the t-account.
What is a credit?
This ratio is calculated by dividing current assets by current liabilities and is used to evaluate a company's liquidity.
What is the current ratio?
These are the two most common classes of shares.
What are common and preferred shares?
The rules created by the Financial Accounting Standards Board (FASB) are given this name.
What are Generally Accepted Accounting Principles (GAAP)?
This type of journal entry records internal economic events (i.e., an economic event that does involve a transaction with an entity outside of the company) and is a direct implementation of accrual accounting.
What is an adjusting entry?
This profession is defined as "independent professionals who render an opinion about whether the financial statements fairly present the company's financial position, performance, and cash flows in compliance with GAAP."
What are auditors?
When a company repurchases its own shares, it can account for the repurchase in one of these two ways.
What is a share retirement or treasury stock?
This is referred to as the "language of business."
What is accounting?
This journal entry restores temporary income statement accounts to zero balances by transferring their amounts to retained earnings in the balance sheet.
What is a closing entry?
The represent the four different types of audit opinions issued by auditors.
What are (1) unqualified opinion, (2) unqualified opinion with explanatory paragraph, (3) qualified opinion, and (4) adverse or disclaimer of opinion?
This transaction represents a distribution of accumulated profit and loss to the company's shareholders.
What is a dividend?