Accounting Fundamentals and GAAP

An information system that identifies, records, and communicates financial events of an organization to interested parties.

The parties who use accounting data to make informed decisions, such as creditors, investors, auditors, and management.

A set of accounting standards generally accepted and universally practiced. These standards guide businesses on how to report economic events in financial reports.

A principle stating that assets should be recorded at their original acquisition cost.

States that revenue should be recognized in the period when it's earned, regardless of when cash is received.

A principle that expenses should be matched with the revenues they help generate in the same accounting period.

Assumptions made when developing GAAP that provide a foundation for the accounting process.

An accounting principle that requires only transactions capable of being expressed in monetary terms to be recorded.

An assumption that requires the business's financial activities to be kept separate from the owner's personal finances.

An assumption that assumes the business will continue operating for a foreseeable, reasonable period of time.

An assumption that allows the business's economic life to be broken into smaller time periods, usually one year.

A professional accountant primarily focused on recording daily transactions and preparing financial statements for a business.

A professional accountant who specializes in recording transactions and preparing financial statements for government entities.

A professional accountant who focuses on determining the cost of producing goods or services.

A professional accountant who provides financial information, analysis, and advice to help management make informed decisions.

A specific type of accountant who prepares tax returns and provides tax planning advice to individuals and businesses.

A certified professional accountant who audits financial statements to assess their fairness and reliability.

An accountant who works within an organization to ensure compliance with management policies and evaluate the efficiency of operations.

Resources owned or controlled by an entity that are used to carry out the activities of the entity.

Tangible assets that have a relatively long life, like buildings, equipment, and furniture.

Assets that are acquired for trading, sale, or consumption within a short period, such as cash, inventory, and receivables.

Assets that are non-physical rights, such as trademarks and copyrights.

Obligations or debts owed by an entity to creditors.

Liabilities that are due to be paid within a short period, such as accounts payable and salaries payable.

Liabilities that are due to be paid over a longer period, such as loans and bonds.

The financial resources invested in the business by the owner.

Resources contributed by the owner to the business.

The gross increase in owner's equity resulting from business activities aimed at earning income.

When an owner withdraws cash or other assets from the business for personal use.

The cost of consumed assets or services used in the process of earning revenue.

A fundamental equation in accounting that shows the relationship between assets, liabilities, and owner's equity.

Economic events that affect an entity's financial position and must be recorded.

Transactions that involve exchanges between the entity and external parties.

Transactions that occur entirely within the entity, such as transferring goods between departments.

The systematic process of identifying, measuring, recording, and communicating financial information about a business.

The process of recording transaction data in a journal.

A system that uses debits and credits to record every transaction with equal amounts on both sides, ensuring the accounting equation remains balanced.

The principle book of accounts that contains a list of all accounts and their balances.

An individual accounting record of the increases and decreases (changes) in assets, liabilities, owner's equity, revenues, and expenses.

The process of transferring journal entries to the accounts in the ledger.

A list of all accounts of the entity, each assigned a unique number for identification and location in the ledger.

The difference between the total debits and total credits in an account.

A list of all accounts in the ledger and their balances at a specific time, usually the end of an accounting period. It serves to prove the equality of debits and credits.