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Accounting

The document provides an overview of key accounting concepts, including definitions of accounting, auditing, financial statements, and various accounting principles. It also covers the structure of accounts, the double-entry system, and the processes involved in recording and reporting financial transactions. Additionally, it outlines the roles of different accounting fields such as financial, managerial, and public accounting.

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6 views

Accounting

The document provides an overview of key accounting concepts, including definitions of accounting, auditing, financial statements, and various accounting principles. It also covers the structure of accounts, the double-entry system, and the processes involved in recording and reporting financial transactions. Additionally, it outlines the roles of different accounting fields such as financial, managerial, and public accounting.

Uploaded by

mahabbat1426
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER-1

Accounting; The information


system that identifies, records,
and communicates the
economic events of an
organization to interested
users .
Accounting information
system; The system of
collecting and processing
transaction data and
communicating financial
information to decision -
makers.
Assets Resources a business
owns.
* Auditing; The examination
of financial statements by a
certified public accountant in
order to express an opinion as
to the fairness of
presentation.
Basic accounting equation;
Assets = Liabilities + Owner's
equity.
Bookkeeping;A part of the
accounting process that
involves only the recording of
economic events.
Convergence ;The process of
reducing the differences
between U.S. GAAP and IFRS .
Corporation; A business
organized as a separate legal
entity under state corporation
law, having ownership divided
into transferable shares.
Drawings; Withdrawal of cash
or other assets from an
unincorporated business for
the personal use of the owner
( s ).
Economic entity assumption;
An assumption that requires
that the activities of the entity
be kept separate and distinct
from the activities of its owner
and all other economic
entities.
Ethics; The standards of
conduct by which actions are
judged as right or wrong ,
honest or dishonest , fair or
not fair .
Expanded accounting
equation; Assets = Liabilities +
Owner’s capital – Owner’s
drawings + Revenues –
Expenses.
Expenses;The cost of assets
consumed or services used in
the process of earning
revenue.
Fair value principle; An
accounting principle stating
that assets and liabilities
should be reported at fair
value ( the price received to
sell an asset or settle a liability
).
Faithful representation;
Numbers and descriptions
match what really existed or
happened – they are factual.
Financial accounting; The field
of accounting that provides
economic and financial
information for investors ,
creditors , and other external
users.
Financial Accounting
Standards Board ( FASB ); A
private organization that
establishes generally accepted
accounting principles in the
United States ( GAAP ).
* Forensic accounting; An
area of accounting that uses
accounting, auditing , and
investigative skills to conduct
investigations into theft and
fraud.
Generally accepted
accounting principles
( GAAP ); Common standards
that indicate how to report
economic events.
Historical cost principle; An
accounting principle that
states that companies should
record assets at their cost.
Income statement; A financial
statement that presents the
revenues and expenses and
resulting net income or net
loss of a company for a
specific period of time.
International Accounting
Standards Board ( IASB ); An
accounting standard - setting
body that issues standards
adopted by many countries
outside of the United States.
International Financial
Reporting Standards ( IFRS );
International accounting
standards set by the
International Accounting
Standards Board ( IASB ).
Investments by owner; The
assets an owner puts into the
business.
Liabilities; Creditor claims
against total assets.
* Management consulting;
An area of public accounting
ranging from development of
accounting and computer
systems to support services
for marketing projects and
merger and acquisition
activities.
Managerial accounting; The
field of accounting that
provides internal reports to
help users make decisions
about their companies.
Monetary unit assumption;
An assumption stating that
companies include in the
accounting records only
transaction data that can be
expressed in terms of money.
Net income; The amount by
which revenues exceed
expenses.
Net loss; The amount by
which expenses exceed
revenues.
Owner's equity; The
ownership claim on total
assets.
Owner's equity statement; A
financial statement that
summarizes the changes in
owner's equity for a specific
period of time.
Partnership; A business
owned by two or more
persons associated as
partners.
* Private ( or managerial )
accounting; An area of
accounting within a company
that involves such activities as
cost accounting , budgeting .
design and support of
accounting information
systems , and tax planning and
preparation.
Proprietorship; A business
owned by one person.
* Public accounting; An area
of accounting in which the
accountant offers expert
service to the general public.
Relevance;Financial
information that is capable of
making a difference in a
decision.
Revenues; The gross increase
in owner’s equity resulting
from business activities
entered into for the purpose
of earning income.
Statement of cash flows; A
financial statement that
summarizes information about
the cash inflows ( receipts )
and cash outflows
( payments ) for a specific
period of time.
Statement of financial
position; A financial statement
that reports the assets,
liabilities , and owner’s equity
at a specific date) .
* Taxation; An area of public
accounting involving tax
advice , tax planning ,
preparing tax returns , and
representing clients before
governmental agencies.
Transactions;The economic
events of a business that are
recorded by accountants.

CHAPTER-2
Account: A record of increases
and decreases in specific
asset, liability, or owner’s
equity items.
Chart of accounts: A list of
accounts and the account
numbers that identify their
location in the ledger.
Compound entry: A journal
entry that involves three or
more accounts.
Credit: The right side of an
account.
Debit: The left side of an
account.
Double – entry system: A
system that records in
appropriate accounts the dual
effect of each transaction.
General journal: The most
basic form of journal.
General ledger: A ledger that
contains all asset, liability ,
and owner’s equity accounts.
Journal: An accounting record
in which transactions are
initially recorded in
chronological order.
Journalizing:The entering of
transaction data in the
journal.
Ledger: The entire group of
accounts maintained by a
company.
Normal balance: An account
balance on the side where an
increase in the account is
recorded.
Posting: The procedure of
transferring journal entries to
the ledger accounts .
Simple entry: A journal entry
that involves only two
accounts.
T – account: The basic form of
an account , consisting of ( 1 )
a title , ( 2 ) a left or debit
side , and ( 3 ) a right or credit
side.
Three – column form of
account: A form with columns
for debit, credit, and balance
amounts in an account.
Trial balance: A list of
accounts and their balances at
a given time.

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