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21 Cards in this Set
- Front
- Back
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What is accounting ? |
Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users. |
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Explain the monetary unit assumption |
The monetary unit assumption requires that companies include in the accounting records only transaction data than can be expressed in terms of money. = Les companies mettent dans les "accounting records" seulement des transactions qui sont exprimées en argent. |
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Explain the economic entity assumption |
The economic entity assumption requires that the activities of each economic entity be kept separate from the activities of its owners and other economic entities. = en gros activités économiques du business sont séparé des activités du owner |
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State the accounting equation |
Assets = Liabilities + Equity |
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Define Assets |
Assets are ressources a business owns |
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Define Liability |
Liabilities are a company's debts and obligations |
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Define Equity |
Equity is the ownership claim on total assets |
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If there is an increase in assets, there will be : |
- A decrease in another asset - An increase in liability - An increase in equity |
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What are the 4 financial statements ? |
- Income Statement - Retained earnings - Balance sheet - Statement of cash flows |
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Explain Income Statement |
Income statement presents the revenues and expenses |
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Explain Retained earnings |
Retained earnings summarize the changes in retained earnings for a specific period of time. (retained earning = earnings that we kept) |
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Explain Balance Sheet (Statement of financial position) |
A balance sheet reports the assets, liabilities and equity at a specific date. |
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Explain Statement of cash flows |
A statement fo cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time. |
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The cost principle states that |
Assets should be recorded at their cost |
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The three types of business entities are : |
- proprietorships - partnerships - corporations |
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Net income will result during a time period when : |
revenues exceed expenses |
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Performing services on account will have the following effects : |
- increase assets (account receivable) - increase owner's equity (service expense) |
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A company's assets are of 3,500€ and owner's equity of 2,000€. What are the liabilities ? |
1500€ 3500-2000=1500 |
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A company's assets decreased 50,000€ and its liabilities decreased 90,000€. It's owner's equity : |
Increased 40,000€ assets = liability + equity Equity = liability - assets Equity = 90,000 - 50,000 Equity = 40,000 |
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Payment of an account payable, affects the components of the accounting equation in the following way : |
- decrease assets (Cash) - decrease liabilities (account payable) |
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A company buys a 900€ machine on credit. This transaction will affect the : |
Balance sheet |
