Key Terms
FASB (Financial Accounting Standards Board)
Independent nonprofit that sets US accounting standards, including GAAP. Delegates standard-setting authority from the S
GAAP (Generally Accepted Accounting Principles)
The concepts, standards, and rules companies follow when preparing financial statements.
SEC (Securities and Exchange Commission)
Independent federal agency. Protects investors, regulates stock markets, ensures GAAP compliance.
IFRS (International Financial Reporting Standards)
Used in 120+ countries. Set by the IASB.
CONCEPTUAL FRAMEWORK
The set of guiding concepts FASB uses as the foundation for creating accounting standards. Helps companies handle transa
Memory shortcut
Assets, Expenses, and Dividends = debit side. Liabilities, Revenues, and Common Stock = credit side.
ABNORMAL BALANCE
When an account shows a balance on the opposite side from its normal balance. Usually signals an error or a specific cir
Ask these questions in order
1. What accounts are affected?
PATTERN TO RECOGNIZE
Paying off a liability with cash (Transactions 8,
Account
Record of increases and decreases to assets, liabilities, or equity. Accounting cycle: step-by-step process to keep fina
Compound entry
Journal entry with more than one debit or credit account. Conservatism: in uncertainty, use the most conservative estima
Debit
Left side of any account. Double-entry accounting: every transaction requires at least one debit and one credit; debits
Going concern assumption
Assume the business will continue operating in the foreseeable future. Journal: chronological record of all transactions
Journalizing
Recording a transaction in the journal (step 2 of the accounting cycle). Monetary measurement: transactions must be expr
Separate entity concept
Keep business and owner personal finances completely separate. Simple entry: journal entry with exactly one debit accoun