"CLEP Financial Accounting," Vocabulary from Chapter 5

This list focuses on accounting reports and the outside world.

Here are links to all the chapters of the test prep book published by Research & Education Association: Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapter 10, Chapter 11, Chapter 12, Chapter 13, Chapter 14, Chapter 15, Chapter 16, Chapter 17, Chapter 18, Chapter 19, Chapter 20
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Full list of words from this list:

words only definitions & notes
  1. audit
    an inspection of accounting procedures and records
  2. auditor
    a qualified accountant who inspects accounting records
  3. certify
    authorize officially
  4. public
    not private
  5. accountant
    someone who maintains and audits financial records
  6. license
    a legal document giving official permission to do something
  7. financial
    involving fiscal matters
  8. accounting
    a statement of recent transactions and the resulting balance
  9. standard
    the ideal in terms of which something can be judged
  10. accept
    consider or hold as true
  11. assurance
    a statement intended to inspire confidence
  12. authority
    persons who exercise control over others
  13. credibility
    the quality of being believable or trustworthy
  14. dependable
    worthy of reliance or trust
  15. reflect
    give evidence of
  16. require
    make someone do something
  17. accuracy
    the quality of being near to the true value
  18. conservative
    avoiding excess
    Conservative Principle: accountants are less likely to do harm if they under-report net income or assets compared to over-report, but if there is uncertainty, this principle requires accountants to select the result that is least favorable.
  19. concern
    a commercial or industrial enterprise
    Going-Concern Principle: financial statements must be based on the assumption that the business will last indefinitely.
  20. historical
    belonging to the past
    Historical Cost Principle: record assets at their historical cost rather than their current value, since current value is a subjective guess that is difficult to verify.
  21. objectivity
    judgment based on observable phenomena
    Objectivity Principle: record transactions using the best objective evidence. Use documented amounts instead of estimates.
  22. stable
    showing little if any change
    Stable Monetary Unit Principle: assume that the value of money stays the same year after year. Basic financial statements do not consider the effects of inflation.
  23. monetary
    relating to or involving money
  24. unit
    a division accepted as a standard of measurement or exchange
  25. principle
    a rule or standard especially of good behavior
    Two good reasons to memorize these principles: (1) some CLEP questions directly cover these principles, and (2) when you do not know an answer, accounting principles will many times guide you to a correct educated guess.
Created on November 2, 2016 (updated December 13, 2016)

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