UF MBA financial accounting exam 1 terms

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Adjusting Entries
Entries that update account balances prior to preparing financial statements; a bookkeeping tool. Adjusting entries never affect cash account
Assets
Economic resources used to produce revenue which is expected to provide future benefit for the business
Audit
Detailed examination of some aspect of a company’s accounting records or operating procedures in order to report the results to interested parties
Balance Sheet
Financial statement that reports a company’s assets and the corresponding claims (liabilities and equity) on those assets as of a specific date (usually as of the end of the accounting period)
Book Value
Historical (original) cost of an asset minus accumulated depreciation to date
Cash Flow Statement
financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities
Channel Stuffing
deceptive business practice used by a company to inflate its sales and earnings figures by deliberately sending retailers along its distribution channel more products than they are able to sell to the public
Closing
Bookkeeping technique of transferring balances from the temporary accounts (revenue, expense, and dividends) to the permanent account (retained earnings).
Common Stock
Basic class of corporate stock that has no preferential claim on assets or dividends; certificates that evidence ownership in a company
Cost flow assumptions
Refers to the methods available for moving costs of a company’s products from its inventory to its cost of goods sold. In the U.S., this refers to FIFO, LIFO, average, and specific identification.
Conservatism
A principle that guides accountants in uncertain circumstances to select the alternative that produces the lowest amount of net income.
Cost of goods sold
Total cost incurred for the goods sold during a specific accounting period
Dividend
Transfer of wealth from a business to its owners
Earnings
Difference between revenues and expenses; profit; net income.
Expenses
Economic sacrifice (decrease in assets or increase in liabilities) that is incurred in the process of generating revenue.
Financing Activities
Cash inflows and outflows from transactions with investors and creditors (except interest), including cash receipts from issuing stock, borrowing activities, and cash disbursements to pay dividends; one of the three categories of cash inflows and outflows reported on the statement of cash flows. This category shows the amount of cash supplied by these resource providers and the amount of cash that is returned to them.
Gains
Increases in assets or decreases in liabilities that result from peripheral or incidental transactions.
General Journal
Book of original entry in which any accounting transaction could be recorded, though commonly limited to adjusting and closing entries and unusual transactions
General Ledger
The set of all accounts used in a given accounting system, typically organized in financial statement order.
Income
Increase in value created by providing goods and services through resource transformation
Income Statement
Financial report of profitability; measures the difference between revenues and expenses for the accounting period (whether or not cash has been exchanged).
Inflation
Sustained increase in general price level of goods and services in an economy over a period of time
Information Overload
Situation in which the presentation of too much information confuses the user of the information
Interest
Fee paid for the use of funds; represents expense to the borrower and revenue to the lender
Internal Controls
Policies and procedures companies establish to provide reasonable assurance of reducing fraud, providing reliable accounting records, and accomplishing organization objectives
Inventory
Goods under production or finished and ready for sale; also stockpiles of supplies used in the business (office supplies, cleaning supplies)
Investing Activities
Cash inflows and outflows associated with buying or selling long-term assets and cash inflows and outflows associated with lending activities and investments in the debt and equity of other companies
Liability
Obligation of a business to relinquish assets, provide services, or accept other obligations.
Liquidity
Ability to convert assets to cash quickly and meet short-term obligations
Losses
Decreases in assets or increases in liabilities that result from peripheral or incidental transactions
Matching Concept
Accounting principle of recognizing expenses in the same accounting period as the revenues they produce, using one of three methods: “vocab term” directly with revenues (e.g., cost of goods sold); “vocab term” expenses to the period in which they are incurred (e.g., rent expense), and “vocab term” expenses systematically with revenues (e.g., depreciation expense).
Materiality
Point at which knowledge of information would influence a user’s decision; can be measured in absolute, percentage, quantitative, or qualitative terms.
Operating Activities
Cash inflows from and outflows for routine, everyday business operations, normally resulting from revenue and expense transactions including interest
Payables
Obligations to make future economic sacrifices usually cash payments
Prepaid Expense
Item that has been paid for in advance
Product Costs
All costs directly traceable to acquiring inventory and getting it ready for sale, including transportation-in.
Receivables
Accounting term for amount due from a customer, employee, supplier, or other party
Retained Earnings
Portion of stockholders’ equity that includes all earnings retained in the business since inception (revenues minus expenses and distributions for all accounting periods).
Revenue
Economic benefit (increase in assets or decrease in liabilities) gained by providing goods or services to customers
Selling and administration costs
Costs such as advertising expense and rent expense that cannot be directly traced to inventory; recognized as expenses in the period in which they are incurred
Separation of duties
Internal control feature of assigning the functions of authorization, recording, and custody to different individuals
Shrinkage
Decreases in inventory for reasons other than sales to customers
transaction
Business event that involves transferring something of value between two entities.
Unearned revenue
Liability arising when customers pay cash in advance for services a business will perform in the future
Categories: Financial Accounting