Accounting Foundations & Terminology Flashcards

Question

What are **Generally Accepted Accounting Principles**? | (GAAP)

Answer 1

**Standards** for **presentation** used in financial statement preparation.

Answer 2

1. Assets 2. Liabilities 3. Equity 4. Comprehensive income 5. Revenues 6. Expenses 7. Gains 8. Losses

Answer 3

The **financial position** of the business as of a **specific date**.

Answer 4

The results of operations during the a **certain period of time**. Revenues and gains minus expenses and losses, showing **net income**.

Answer 5

Cash flow includes **cash receipts and expenditures**, while net income accounts for accruals.

Answer 6

* Cash receipts * Cash payments * Cash from operating activities * Cash from investing activities * Cash from financing activities ## Footnote The statement of cash flows provides information regarding cash receipts and cash payments made by the company during a reporting period.

Answer 7

**Present rights** of an entity to an economic benefit that arose from a past transaction. This is 'what is owned' by the company. ## Footnote An entity can operate legally, own property, engage in business, enter into contracts, pay taxes, and sue and be sued.

Answer 8

**Present obligations** of an entity to transfer or otherwise provide an economic benefit or benefits to others that arose from a past transaction. This is 'what is owed' by the company.

Answer 9

Also called **owners' equity**, it represents the **ownership interest** in a business entity. It is the portion of the company’s assets owned by and owed to the owners.

Answer 10

**Inflows** or other enhancements of assets or settlements of liabilities that result from delivering or producing goods, rendering services, or other primary activities of the business.

Answer 11

**Outflows** or other using-up of assets or the incurrence of liabilities that result from delivering or producing goods, providing services, or carrying out other activities that are the primary activities of the business.

Answer 12

**Increases in equity** resulting from transactions and other events and circumstances affecting an entity other than those that result from revenues or investments by owners.

Answer 13

**Decreases in equity** that result from transactions and other events and circumstances affecting an entity other than those that result from expenses or distributions to owners.

Answer 14

Simply called '**accounts**', these are established within the accounting system to **classify accounting entries**.

Answer 15

* Asset accounts * Liability accounts * Equity accounts * Revenue accounts * Gain accounts * Expense accounts * Loss accounts ## Footnote Ledger accounts are also classified as permanent accounts or temporary accounts.

Answer 16

Accounts whose balances continue to **increase and decrease** with each entry affecting them, from accounting period to accounting period, and they are never reset to zero. ## Footnote Permanent accounts include assets, liabilities and equity accounts.

Answer 17

Accounts that are **closed at the end** of each accounting period, usually a **fiscal year**, and start the next period with a $0 balance. ## Footnote Temporary accounts include revenue accounts, gain accounts, expense accounts, and loss accounts.

Answer 18

This **resets their balances to zero** in preparation for the next accounting period.

Answer 19

A ledger account that **reduces the value of another account** when the accounts are netted.

Answer 20

A business that has been granted **tax-exempt status** because it furthers a social cause and provides a public benefit.

Answer 21

Revenues is recognized when **cash is received**.

Answer 22

The **undistributed profits** of the company since it began. It is available to be reinvested in the company.

Accounting Foundations & Terminology Flashcards

Understand the role of accounting, major principles, and foundational terminology. (46 cards)