Financial Accounting
Provides relevant financial information to various external users
Financial Reporting
Process of providing financial statement information to external users
Capital Markets
Mechanisms that fosters the allocation of resources efficiently
Corporation
The dominant form of business organization that acquires capital from investors in exchange for ownership interest and form creditors by borrowing
Initial Market Transactions
Provide new cash by the insurance of stocks and bonds by the corporation
Secondary Market Transactions
Provide for the transfer of stocks and bonds among individuals and institutions.
Accrual Accounting
Measurement of the entity's accomplishments and resources sacrifices during the period, regardless of when cash is received or paid
Generally Accepted Accounting Principles (GAAP)
Set of both broad and specific guidelines that companies should follow when measuring and reporting the information in their financial statements and related notes.
Revenues
Measure of resources provided by business operations
Expenses
Measure of resources sacrificed to produce revenues
Net Income
The difference between revenues and expenses
Securities and Exchange Commission (SEC)
Responsible for setting accounting and reporting standards for companies whose securities are publicly traded
Committee on Accounting Procedure (CAP)
The 1st private sector body that was delegated the task of setting accounting standards
American Institute of Accountants (AIA)/American Institute of Certified Public Accountants (AICPA)
National organization of professional public accountants.
Accounting Principles Board (APB)
The second private sector body delegated the task of setting accounting standards.
Financial Accounting Standards Board (FASB)
The current private sector body that has been delegated the task of setting accounting standards.
Financial Accounting Foundation (FAF)
Responsible for selecting the members of the FASB and its Advisory Council, ensuring adequate funding of FASB activities, and exercising general oversight of the FASB's activities.
Emerging Issues Task Force (EITF)
Responsible for providing more timely responses to emerging financial reporting issues.
Conceptual framework
Deals with theoretical and conceptual issues and provides an underlying structure for current and future accounting and reporting standards.
Government Accounting Standards Board (GASB)
Responsible for developing accounting standards for governmental units such as states and cities.
International Accounting Standards Committee (IASC)
Umbrella organization formed to develop global accounting standards.
International Accounting Standards Board (IASB)
Objectives are to develop a single set of high-quality, understandable global accounting standards, to promote the use of those standards, and to bring about the convergence of national accounting standards and International Accounting Standards.
International Financial Reporting Standards (IFRS)
Developed by the IASB and used by more than 100 countries.
Certified Public Accountants (CPAs)
Licensed individuals who can represent that the financial statements have been audited in accordance with generally accepted auditing standards.
Decision usefulness
The quality of being useful to decision making.
Relevance
One of the primary decision-specific qualities that make accounting information useful; made up of predictive value and/or feedback value, and timeliness.
Neutrality
Neutral with respect to parties potentially affected.
Consistency
Permits valid comparisons between different periods.
Cost effectiveness
The perceived benefit of increased decision usefulness exceeds the anticipated cost of providing that information.
Going concern assumption
In the absence of information to the contrary, it is anticipated that a business entity will continue to operate indefinitely.
Periodicity assumption
Allows the life of a company to be divided into artificial time periods to provide timely information.
Recognition
Process of admitting information into the basic financial statements.
Measurement
Process of associating numerical amounts to the elements.
Full-disclosure principle
The financial reports should include any information that could affect the decisions made by external users.
Periodicity assumption
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