Key state from chapter 1: Introducing audit in business from financial Accounting, details for decisions by john J. Wild. McGraw-Hill, 2005.

You are watching: The accounting principle that requires accounting information to be based on actual cost

Accounting
AB
Information and also measurement system that identifies, records, and communicates pertinent information around a company"s company activities.
Accounting EquationEquality involving a company"s assets, liabilities, and equity: assets = liabilities + Equity; also called balance paper equation.
AssetsResources a organization owns or controls that are expected to administer current and also future services to the business.
AuditAnalysis and report of one organization"s bookkeeping system, that records, and also its reports using assorted tests.
Balance SheetFinancial statement the lists species and dollar quantities of assets, liabilities, and also equity at a particular date.
BookkeepingPart of accounting that involves recording transactions and also events, one of two people manually or electronically; likewise called bookkeeping.
Business entity PrinciplePrinciple that needs a company to be accounting for separately from that is owner(s) and from any other entity
Common StockCorporation"s an easy ownership share; also called resources stock.
Contributed CapitalTotal amount of cash and other assets obtained from shareholder in exchange for stock; additionally called paid-in capital.
CorporationBusiness that is a separate legal reality under state or federal legislations with owners referred to as shareholders or stockholders.
Cost PrincipleAccounting principle that calls for financial statement details to be based on actual prices incurred in organization transactions.
DividendsCorporation"s distribution of assets come its owners.
EquityOwner"s claim on the assets of a business; equates to the residual attention in one entity"s assets ~ deducting liabilities; additionally called net assets.
EthicsCodes that conduct by which actions are judged as right or wrong, same or unfair, moral or dishonest.
EventsHappenings that both affect an organization"s gaue won position and can be reliably measured.
Expanded accounting EquationAssets = liabilities + Equity wherein Equity amounts to .
ExpensesOutflows or using up of heritage as part of to work of a business to create sales.
External TransactionsExchanges of financial value in between one entity and also another entity.
External UsersPersons using accounting information who are not directly associated in to run the organization.
Financial AccountingArea of bookkeeping mainly aimed in ~ serving external users.
Financial accounting Standards board (FASB)Independent team of permanent members responsible for setting accounting rules.
Generally Accepted accounting Principles (GAAP)Rules that specify acceptable accounting practices.
Going-Concern PrinciplePrinciple that needs financial statements to reflect the presumption that the service will continue operating.
IncomeAmount deserve after subtracting all costs necessary for and matched with sales for a period; likewise called income, profit, or earnings.
Income StatementFinancial statement the subtracts costs from earnings to yield a net income or loss over a specified duration of time; additionally includes any kind of gains or losses.
Internal TransactionsActivities within an company that can impact the accounting equation.
Internal UsersPersons using accounting information who space directly connected in regulating the organization.
International audit Standards plank (IASB)Group the identifies preferred bookkeeping practices and encourages an international acceptance; worries International financial Reporting criter (IFRS).
LiabilitiesCreditors" claims on one organization"s assets; requires a probable future payment of heritage or solutions that a agency is obligated to make due to past transactions or events.
Managerial AccountingArea of accountancy mainly aimed at serving the decision-making demands of inner users; likewise called management accounting.
Monetary Unit PrinciplePrinciple the assumes transactions and events deserve to be expressed in money units.
Net AssetsOwner"s claim on the assets of a business; amounts to the residual interest in an entity"s assets after deducting liabilities; also called network assets.
Net IncomeAmount earned after subtracting all expenses necessary for and matched with sales because that a period; likewise called income, profit, or earnings.
Net LossExcess of prices over revenues for a period.
Objectivity PrinciplePrinciple that prescribes independent, unbiased evidence to support financial explain information.
PartnershipUnincorporated association of two or more persons to pursue a organization for profit as co-owners.
ProprietorshipBusiness own by one person that is not organized as a corporation; likewise called proprietorship.
RecordkeepingPart of accounting that entails recording transactions and events, either manually or electronically; additionally called bookkeeping.
Retained EarningsCumulative earnings less accumulation losses and also dividends.
ReturnMonies received from an investment; frequently in percent form.
Return ~ above AssetsRatio reflecting operating efficiency; identified as net income divided by average total assets; also called return on assets or return ~ above investment.
RevenuesGross rise in same from a company"s business tasks that earn income; likewise called sales.
Revenue recognition PrincipleThe rule prescribing that revenue is well-known when earned.
RiskUncertainty around an supposed return.
Securities and also Exchange the supervisory board (SEC)Federal firm Congress has actually charged to collection reporting rules for organizations that offer ownership share to the public.
ShareholdersOwners the a corporation; likewise called stockholders.
SharesEquity that a corporation split into units; likewise called stock.
Sole ProprietorshipBusiness owned by one person that is not arranged as a corporation; likewise called proprietorship.
Statement the Cash FlowsA jae won statement that lists cash inflows (receipts) and also cash outflows (payments) during a period; arranged by operating, investing, and also financing.
Statement of kept EarningsReport of changes in retained income over a period; readjusted for rises (net income), because that decreases (dividends and also net loss), and also for any prior period adjustments.
StockEquity of a corporation divided into units; likewise called stock.

See more: What Is An Apostle Higher Than A Pastor ? Apostles, Prophets, Evangelists, And Pastor

StockholdersOwners the a corporation; additionally called stockholders.
*