Define the Concept of Financial Accounting Flashcards

An information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information

Those not directly involved with running the company
ex. shareholdersinvestorslenderscustomerssuppliersregulatorslawyersbrokersthe press

The area of accounting aimed at serving external users by providing them with general purpose financial statements

Statements that have broad range of purposes which external users rely on

Those directly involved in managing and operating an organization

The area of accounting that serves the decision making needs of internal users

Procedures set up to protect company property and equipment, ensure reliable accounting reports, promote efficienty, and encourage adhearence to company policies

Beliefs that distinguish right from wrong

Concepts and rules that govern financial accounting. purpose is to make information in accounting statements relevent, reliable, and comparable

Basic assumptions, concepts, and guidelines for perparing financial statements
stem from long used accounting practices

Detailed rules used in reporting transactions
arise from rulings of authorative bodies

Financial statements are based on actual costs incurred in business transactions. cost is measured on a cash or equal to cash basis. this principle emphasizes reliability and verifiability, and information based on cost is considered objective

Revenue is recognized (recorded) when earned. proceeds need not be in cash. revenue is measured by cash received plus the cash value of other items received

A company must record expenses incurred to generate revenues it reported

Requires reporting the details behind the financial statements that would impact users decisions