| Accounting | Information and measurement system that identifies, records, and communicates relevant information about a company's business activities.
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| Accounting equation | Equality involving a company's assets, liabilities, and equity; Assets = Liabilities + Equity; also called balance sheet equation.
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| Assets | Resources a business owns or controls that are expected to provide current and future benefits to the business.
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| Balance sheet | Financial statement that lists types and dollar amounts of assets, liabilities, and equity at a specific date.
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| Balance sheet equation | (See accounting equation.)
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| Bookkeeping | (See recordkeeping.)
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| Business | One or more individuals selling products and/or services for profit.
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| Business entity principle | Principle that requires a business to be accounted for separately from its owner(s) and from any other entity.
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| Common stock | Corporation's basic ownership share; also called capital stock.
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| Corporation | Business that is a separate legal entity under state or federal laws with owners called shareholders or stockholders.
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| Cost principle | Accounting principle that requires financial statement information to be based on actual costs incurred in business transactions.
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| Double taxation | Corporate income is taxed and then its later distribution through dividends is taxed again for shareholders.
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| Earnings | (See net income.)
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| Entity | Organization that, for accounting purposes, is separate from other organizations and individuals.
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| Equity | Owner's claim on the assets of a business; equals the residual interest in an entity's assets after deducting liabilities; also called net assets.
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| Ethics | Codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest.
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| Events | Happenings that both affect an organization's financial position and can be reliably measured.
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| Expanded accounting equation | Assets = Liabilities + Equity where Equity equals [Owner capital - Owner withdrawals + Revenues - Expenses].
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| Expenses | Outflows or using up of assets as part of operations of a business to generate sales.
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| External transactions | Exchanges of economic value between one entity and another entity.
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| External users | Persons using accounting information who are not directly involved in running the organization.
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| Financial accounting | Area of accounting mainly aimed at serving external users.
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| Financial Accounting Standards Board (FASB) | Independent group of full-time members responsible for setting accounting rules.
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| Financial statements | Includes the balance sheet, income statement, statement of owner's equity, and statement of cash flows.
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| Generally accepted accounting principles (GAAP) | Rules that specify acceptable accounting practices.
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| Generally accepted auditing standards (GAAS) | Rules that specify acceptable auditing practices.
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| Going-concern principle | Principle that requires financial statements to reflect the assumption that the business will continue operating.
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| Income | (See net income.)
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| Income statement | Financial statement that subtracts expenses from revenues to yield a net income or loss over a specified period of time; also includes any gains or losses.
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| Internal transactions | Activities within an organization that can affect the accounting equation.
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| Internal users | Persons using accounting information who are directly involved in managing the organization.
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| International Accounting Standards Board (IASB) | Group that identifies preferred accounting practices and encourages global acceptance; issues International Financial Reporting Standards (IFRS).
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| Liabilities | Creditors' claims on an organization's assets; involves a probable future payment of assets or services that a company is obligated to make due to past transactions or events.
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| Limited liability | Owner can lose no more than the amount invested.
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| Managerial accounting | Area of accounting mainly aimed at serving the decision-making needs of internal users; also called management accounting.
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| Monetary unit principle | Principle that assumes transactions and events can be expressed in money units.
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| Net assets | (See equity.)
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| Net income | Amount earned after subtracting all expenses necessary for and matched with sales for a period; also called income, profit, or earnings.
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| Net loss | Excess of expenses over revenues for a period.
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| Objectivity principle | Principle that prescribes independent, unbiased evidence to support financial statement information.
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| Owner investment | Assets put into the business by the owner.
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| Owner withdrawals | (See withdrawal.)
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| Owner's equity | (See equity.)
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| Paid-in capital | (See contributed capital.)
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| Partnership | Unincorporated association of two or more persons to pursue a business for profit as co-owners.
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| Profit | (See net income.)
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| Proprietorship | (See sole proprietorship.)
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| Recordkeeping | Part of accounting that involves recording transactions and events, either manually or electronically; also called bookkeeping.
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| Return | Monies received from an investment; often in percent form.
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| Return on total assets | Ratio reflecting operating efficiency; defined as net income divided by average total assets; also called return on assets or return on investment.
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| Revenue recognition principle | The principle prescribing that revenue is recognized when earned.
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| Revenues | Gross increase in equity from a company's business activities that earn income; also called sales.
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| Risk | Uncertainty about an expected return.
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| Sales | (See revenues.)
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| Securities and Exchange Commission (SEC) | Federal agency Congress has charged to set reporting rules for organizations that sell ownership shares to the public.
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| Shareholders | Owners of a corporation; also called stockholders.
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| Shares | Equity of a corporation divided into units; also called stock.
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| Social responsibility | Being accountable for the impact that one's actions might have on society.
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| Sole proprietorship | Business owned by one person that is not organized as a corporation; also called proprietorship.
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| Statement of cash flows | A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged by operating, investing, and financing.
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| Statement of owner's equity | Report of changes in equity over a period; adjusted for increases (owner investment and net income) and for decreases (withdrawals and net loss).
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| Statements of Financial Accounting Standards (SFAS) | FASB publications that establish U.S. GAAP.
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| Stock | (See shares.)
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| Stockholders | (See shareholders.)
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| Transaction | Exchange of economic consideration affecting an entity's financial position that can be reliably measured.
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| Withdrawal (CS) | Payment of cash or other assets from a proprietorship or partnership to its owner or owners.
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