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49 Cards in this Set
- Front
- Back
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Financial Accounting |
Provision of information about the firm to external users of information |
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Managerial Accounting |
information to internal users |
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organization |
A collection of individuals who come together for a common purpose |
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Sole Proprietorship |
1 person , Most common |
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Partnership |
2 or 3 persons conduct business |
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Corporation |
Separate legal entity, owners not personally liable , |
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Business Activities |
1.Operating Act- day to day activities(Sell goods, inventory, pay wages)
2. Investing Act-Long term resources(Buy equipment, build new stores)
3. Financing Act-Acquiring money to support operations(raise capital, loan) -Debt financing- borrowing money from bank -Equity financing-selling shares of stock to investors. |
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Sarbanes-Oxley Act 2002 |
to deter unethical behavior |
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Accounting |
The process of measuring economic activity of an entity in monetary terms and communicating the results to users *Not all txns need tp be recorded like hiring a new employee |
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GAAP |
Generally accepted accounting principles -set of rules understood by users of financial reports |
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IASB IFRS |
International accounting standards board |
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Fundamental accounting equation |
ASSETS=LIABILITIES+ STockHolders EQ |
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Net Assets(Shareholders) |
Assets-liabilities |
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Asset |
economic resources that hold specific monetary value and will yield future economic benefit(Physical, tangible, or monetary) |
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Liabilities |
Obligations or debt the firm has incurred as a result of past transactions and have to fufill in the future. This fufillment will result in a reduction of the assets of a firm |
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Balance sheet |
Reported at a point in time (usually the end of a period) Snapshots firms financial position |
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Income statement |
Net income = Revenue - Expenses Prepared over a period of time revenue increases in a company resources from providing goods and services Expenses decrease in resources from providing revenue |
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Statement of stockholders equity |
Reports the events causing an increase or decrease in a companys stockholders equity for a given period of time |
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Stockholders equity equation |
SEQ(end)= SEQ(Begin)+NI-DIV Retained Earnings= NI -DIV |
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Statement of Cash flows |
In a given period how much cash came in an out of a company, over a period of time |
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Relationship among statements |
Income Statement, Statement of SEQ and Cashflow statement are prepared over time 1.IS 2.SEQ 3.BS- beginning or end of period 4.CF |
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Notes to financial statements |
Contains info about assumptions, estimates, measurement procedures, and details behind summary numbers |
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Auditor's Report |
Report of the independent auditor containing an opinion regarding financial statements 1. financial statement prepared by employees 2. Auditor validates on behalf of shareholders |
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Principles |
1. Cost Principle 2. Revenue Recgonition Principle 3.Expense Recgonition (matching) 4.Full disclosure principle |
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Cost principle |
Assets and Liabilities initially recorded at the amount paid or obligated to pay (Purchase in 1901 10g 2014assets 10g) |
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Expense recgonition principle |
Matching -All expenses incurred to create revenue for a period must be matched with revenue for that period |
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Full Disclosure Principle |
A business discloses all significant financial facts and circumstances that occurred during a period |
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The Accounting Cycle |
1. Analyze 2.Record -journalize in gen. journal, Post T acts into ledger(unadjusted trial balance) 3. Adjust -Identify and journalize accurals and prepayments, Adjusted Trial Balance 4. Report -Prepare 4 financial statements 5. close |
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Transaction |
An event that causes a change in the accounting equation |
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Source Documents |
Txns give rise to documents (sales receipts, pay stubs) |
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Double entry accounting |
every transaction has 2 impacts accounting system records both |
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Accounts payable |
when a firm buys on credit, they incur an obligation to the seller |
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Stocholders Equity = |
Commonstock + Retained Earnings(Profit not returned to shareholders) |
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The Accounting Equation EXPANDED |
A=L + SEQ SEQ= Commonstock + R.E R.E= NI - DIV (NI=REVENUE-EXPENSES)
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Trial Balance |
omes before financial statement, serves as a check to debits= credits
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Two Types of Accounting |
Cash Accrual |
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Cash Accounting |
Records transactions based on cash inflow and outflows |
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Accrual Accounting |
Required by GAAP Requires companies to report accounting txns without cash having been received or paid -BAsed on Revenue recognition and expense recognition |
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Revenue Recgonition Principle |
Revenue recognized when earned(When goods delivered) -Cash received at the same time as delivery (cash dr, salves rev cr) -Cash received after revenue is recgonized (Accts recievable dr, sales rev cr) -Cash received before revenue is recognized (Cash dr, unearned revenue cr) |
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Types of Adjustments |
1. Prepaid expenses 2.Unearned revenue 3. Accured expenses 4. Accured revenue |
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Prepaid expenses |
Allocating previously recorded assets to expense |
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Unearned revenue |
allocating previously recorded unearned revenue to revenue(Customer paid before goods received) |
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Accured Expenses |
ecording operating expenses that have not yet been paid for or recorded (received product but didn't pay yet) |
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Accured Revenues |
Recording revenue that has been earned but not yet received or recorded(Provide product but not received cash) |
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Depreciation |
Cost of acquiring a fixed asset being written off over the period it generates revenue purchase price / Depreciation months |
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Contra account |
It has an opposite balance compared to other accounts in its category Depreciation exp dr, Accumulated depreciation cr |
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Allocating previously recorded Assets to expense |
1. Updating balance in supplies account(Supplies inventory and cost of goods sold) 2.Rent expenses(prepaid rent and rent expense) 3.Depreciation expense(Accumulated and dep. expense) 4. Interest payable(Interest payable and interest exp) 5. Accured revenue(Accounts receivable and sales rev) |
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Current/Long term liabilities |
Current-Accounts payable, interest payable Long- Notes payable |
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Permanent/Temporary accounts |
Temp accounts zeroed out at the end of accounting periods |
