| 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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| Audit | Analysis and report of an organization's accounting system, its records, and its reports using various tests.
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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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| Bookkeeping | (See recordkeeping.)
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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 generically called capital stock.
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| Contributed capital | Total amount of cash and other assets received from stockholders in exchange for stock; also called paid-in capital.
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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 prescribes financial statement information to be based on actual costs incurred in business transactions.
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| Dividends | Corporation's distributions of assets to its owners.
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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; Equity equals [Contributed Capital + Retained Earnings + Revenues - Expenses] for a corporation where Dividends are subtracted from Retained Earnings.
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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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| Generally accepted auditing standards (GAAS) | Rules that specify acceptable auditing practices. General-purpose financial statements Statements published periodically for use by a variety of interested parties; includes the income statement, balance sheet, statement of stockholders' equity (or statement of retained earnings), statement of cash flows, and notes to these statements.
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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 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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| Income | Summary Temporary account used only in the closing process to which the balances of revenue and expense accounts (including any gains or losses) are transferred; its balance is transferred to the retained earnings account.
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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, products, or services that a company is obligated to make due to past transactions or events.
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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 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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| Partnership liquidation | Dissolution of a partnership by (1) selling noncash assets and allocating any gain or loss according to partners' income-and-loss ratio, (2) paying liabilities, and (3) distributing any remaining cash according to partners' capital balances.
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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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| Retained earnings | Cumulative income less cumulative losses and dividends.
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| Return | Monies received from an investment; often in percent form.
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| Return on assets | (See return on total assets.)
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| Return on total assets | Ratio reflecting operating efficiency; defined as net income divided by average total assets for the period; 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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| Sarbanes-Oxley Act | Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws.
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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 ownership units; also called stock.
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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 retained earnings | Report of changes in retained earnings over a period; adjusted for increases (net income), for decreases (dividends and net loss), and for any prior period adjustment.
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| Stock | (See shares.)
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| Stockholders | (See shareholders.)
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