the process of identifying, measuring, recording, and communicating financial information about a company's business activities so decision makers can make informed decisions.
outside the business:
providing information that satisfies the needs of external decision-makers (outside demand).
business owned by one person.
examples: small local businesses such as restaurants, photography studios, retail stores, etc.
business owned jointly by two or more individuals.
examples: physicians, lawyers, accountants.
business organized under the laws of a particular state.
examples: apple; owned by stockholders
reports the resources (assets) owned by a company and the claims against those resources (liabilities and stockholders' equity) at a specific point in time.
reports how well a company has performed its operations (revenues, expeses, and income) over a period of time.
reports how much of the company's income was retained in the business and how much was distributed to owners over a period of time.
considered a residual interest in the assets of a corporation that remain after deducting its liabilities.
assets that are not classified as long-term or noncurrent assets.
includes: long-term investments; property, plant, and equipment; intangible assets.
company expects to hold the investment for longer than one year.
represents the tangible, long-lived, productive assets used by a company in its operations to produce revenue.
provide a benefit to a company over a number of years; lack physical substance
consist of obligations that will be satisfied within one year or the operating cycle, whichever is longer.
obligations of the company that will require payment beyone one year or the operating cycle, whichever is longer
measure of liquidy, computed as:
an alternative measure of liquidy that allows comparisons to be made between different companies and is computed as:
add revenues together
add expenses together
subtract: revenues - expenses = net income
retained earnings (from beginning of year)
add: net income
retained earnings = total from calculations
simple and orderly process based on a series of steps and conventions.
describes the system used by companies to record the effects of transactions on the accounting equation.