Accounting: An information system that identifies, measures, records and communicates relevant,

reliable, and comparable information about an organization's economic activities.

Accounts payable: A liability created by buying goods or services on credit.

Accounts receivable: An asset created by selling products or services on credit. Amounts due from
customers for credit sales.

Balance sheet: A financial statement that reports the financial position of a business at a point in time;
lists the types and dollar amounts of assets, liabilities, and equity as of a specific date; also called the
statement of financial position. ASB (Auditing Standards Board): is the AICPA's (American Institute of
Certified Public Accountants) senior committee for auditing, attestation, and quality control applicable to
the performance and issuance of audit and attestation reports for non-issuers.

Assets: are present economic resources controlled by the entity as a result of past events. An economic
resource is a right that has the potential to produce economic benefits.

Audit: A check of an organization's accounting systems and records.

Balance sheet: A financial statement that reports the financial position of a business at a point in time;
lists the types and dollar amounts of assets, liabilities, and equity as of a specific date; also called the
statement of financial position.

Balance sheet equation: Another name for the accounting equation.

Business entity principle: The principle that requires every business to be accounted for separately from
its owner or owners; based on the goal of providing relevant information about each business to users.

Business transaction: An economic event that changes the financial position of an organization; often
takes the form of an exchange of

economic consideration (such as goods, services, money, or rights to collect money) between two
parties.

Calendar year: An accounting year that begins January 1 and ends December 31

Continuing-concern principle: Another name for the going-concern principle.

Cost principle: The accounting principle that requires financial statement information to be based on
actual costs incurred in business transactions; it requires assets and services to be recorded initially at
the cash or cash equivalent amount given in exchange. Common share: a corporation's shares when only
one class of share capital is issued.

Computerized Accounting Systems: are information technology developments that aid complex
accounting transaction processes by automatically executing accounting procedures in a computer.

Continuing-concern Principle: an assumption that the company will stay in business and that the value of
its assets will endure.

Controller: The chief accounting officer of an organization.

Creditors: Individuals or organizations entitled to receive payments from a company.

Data: all the data (ledgers and journals and spreadsheets) that support a financial statement; can be
hard copy or machine readable.

Debtors: Individuals or organizations that owe amounts to a business.

Dividends: Distributions of assets by a corporation to its owners.

Earnings: The amount a business earns after subtracting all expenses necessary to create revenues; also
called net income or profit.

E-business: Conducting business online; commonly sales transactions and/or marketing.

Economic entity principle: See Business entity principle.

Equity: The owner's claim on the assets of a business; more precisely, the residual interest in the assets
of an entity that remains after deducting its liabilities; also called net assets.

Ethics: Beliefs that separate right from wrong.

Expenses: The costs incurred to earn revenues (or sales). Outflows or the using up of assets as a result of
the major or central operations of a business; also, liabilities may be increased.

External auditors/ing: Examine and provide assurance that financial statements are prepared according
to PFRS/Generally accepted accounting principles (GAAP)

External users: Persons using accounting information who are not directly involved in the running of the
organization; examples include shareholders, customers, regulators, and suppliers.

Financial accounting: The area of accounting aimed at serving external users.

Financial statements: The most important products of accounting; include the balance sheet, income
statement, statement of changes in owner's equity, and the statement of cash flows.

Fiscal year: A one-year reporting period not ending in December 31.

Functional Areas: the six functional areas of business management involve strategy, marketing, finance,
human resources, technology and equipment, and operations.

GAAP (Generally accepted accounting principles): The rules adopted by the accounting profession that
make up acceptable accounting practices for the preparation of financial statements.

GAAS (Generally accepted auditing standards): Rules adopted by the accounting profession as guides for
conducting audits of financial statements.

Going-concern principle: The rule that requires financial statements to reflect the assumption that the
business will continue operating instead of being closed or sold, unless evidence shows that it will not
continue; also called continuing-concern principle.
Government accountants: Work for local, provincial and federal government agencies.

IASC: International Accounting Standards Committee; a committee that attempts to create more
harmony among the accounting practices of different countries by identifying preferred practices and
encouraging their worldwide acceptance.

Income statement: The financial statement that shows whether the business earned a profit by
subtracting expenses from revenues; it lists the types and amounts of revenues earned and expenses
incurred by a business over a period of time.

Information: refers to the financial statements generated through the process of book-keeping and
accounting i.e., trading and profit and loss account and, balance sheet.

Internal auditors/ing: Employees within organizations who assess whether managers are following
established operating procedures and evaluate the efficiency of operating procedures.

Internal controls: Procedures set up to protect assets, ensure reliable accounting reports, promote
efficiency, and encourage adherence to company policies.

Internal users: Persons using accounting information who are directly involved in managing and
operating an organization; examples include managers and officers.

Liabilities: The obligations of a business; claims by others that will reduce the future assets of a business
or require future services or products.

Limited liability: The owner's liability is limited to their investment in the business.

Limited liability partnership: Restricts partners' liabilities to their own acts and the acts of individuals
under their control. A partnership in which each partner is not personally liable for malpractice or
negligence claims unless the partner was responsible for providing the service that resulted in the claim.

Management consulting: Activity in which suggestions are offered for improving a company's
procedures; the suggestions may concern new accounting and internal control systems, new computer
systems, budgeting, and employee benefit plans.

Managerial accounting: The area of accounting aimed at serving the decision-making needs of internal
users. The collecting, managing, and processing of financial and nonfinancial information for use by
managers and other internal decision makers of an organization.

Monetary unit principle: The expression of transactions and events in money units; examples include
units such as the dollar, peso, and pound sterling.

Natural business year: A 12-month period that ends when a company's sales activities are at their lowest
point.

Net assets: Another name for equity.

Net income: The amount a business earns after subtracting all expenses incurred to generate revenues;
also called profit or earnings.
Net loss: Arises when total expenses are more than revenues (sales). The excess of expenses over
revenues for a period.

Notes payable: A liability expressed by a written promise to make a future payment at a specific time.

Objectivity principle: The accounting guideline that requires financial statement information to be
supported by independent, unbiased evidence rather than someone's opinion; objectivity adds to the
reliability, verifiability, and usefulness of accounting information.

Owner Investments: The transfer of an owner's personal assets to their business.

Partnership: An unincorporated association of two or more persons to pursue a business for profit as co-
owners.

Private accountants: Accountants who work for a single employer other than the government or a public
accounting firm.

Profit: The amount a business earns after subtracting all expenses incurred to generate revenues; also
called net income or earnings.

Public accountants: Accountants who provide their services to many different clients.

Realization Principle: is to recognize revenue when the earnings process is virtually complete and the
value of an exchange of goods or services is known or can be reliably determined.

Revenues: The amounts earned from selling products or services; also called sales. Inflows of assets
received in exchange for goods or services provided to customers as part of the major or primary
operations of the business; may occur as inflows of assets or decreases in liabilities.

Revenue recognition principle: Provides guidance on when revenue should be reflected on the income
statement; the rule includes three guidelines (1) requires revenue to be recognized at the time it is
earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3)
measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets
received from customers in exchange for goods or services.

Sales: The amounts earned from selling products or services; also called revenues.

Shareholders: The owners of a corporation.

Shares: A unit of ownership in a corporation.

Single proprietorship: A business owned by one individual that is not organized as a corporation; also
called a sole proprietorship.

Social responsibility: Involves considering the impact and being accountable for the effects that actions
might have on society.

Sole proprietorship: A business owned by one person that is not organized as a corporation; also called
single proprietorship.

Statement of cash flows: A financial statement that describes the sources and uses of cash for a
reporting period, i.e., where a company's cash came from (receipts) and where it went during the period
(payments); the cash flows are arranged by an organization's major activities: operating, investing, and
financing activities.

Statement of financial position: Another name for the balance sheet.

Statement of owner's equity: Reports the changes in equity over the reporting period; beginning equity
is adjusted for increases such as owner investment or net income and for decreases such as owner
withdrawals or a net loss.

Tax accounting: The field of accounting that includes preparing tax returns and planning future
transactions to minimize the amount of tax; involves private, public, and government accountants.

Understandable: the concept that financial information should be presented so that a reader can easily
comprehend it.

Unlimited liability: When the debts of a sole proprietorship or partnership are greater than its resources,
the owner(s) is financially.

Withdrawal: The distribution of cash or other assets from a proprietorship or partnership to its owner or
owners.