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86 Cards in this Set
- Front
- Back
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Branches of Accounting |
Financial Accounting Cost Accounting Managerial Accounting Tax Accounting Auditing Accounting Systems |
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Financial Accounting |
Accounting for revenues, expenses, assets, and liabilities
Deals with past events |
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Cost Accounting |
Accounting dealing with recording, classification, allocation, and reporting of current and prospective costs |
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Managerial Accounting |
Designed to provide information to various management levels
Focuses on forecasting and budgeting |
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Tax Accounting |
Accounting relating to the preparation and filing of tax forms with government agencies
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Auditing |
Accounting involved in reviewing and evaluating documents, records, and control systems
Can be internal or external |
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Accounting Systems |
Personnel review the information systems of hospitality organizations |
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Organizations Influencing Accounting |
Sole Proprietorships Partnerships Limited Partnerships Limited Liability Comapnies Corporations |
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Sole Proprietorships |
Business owned by a single person |
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Partnerships |
Business owned by two or more people
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Limited Partnerships |
Form of partnership that offers the protection of limited liability
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Limited Liability Company |
Combines the corporate feature of limited liability with the favorable tax treatment of sole proprietorships and partnerships |
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Corporations |
Legal entity created by a state or another political authority, has stockholders)
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Principles of Accounting |
Cost Business Entity Continuity of the Business Unit Unit of Measure Objective Evidence Full Disclosure Consistency Matching Conservatism Materiality |
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Cost Principle |
When you buy something, you record it at its cost |
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Business Entity |
Your business finances is separate from your personal finances |
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Continuity of Business |
Doing financial statements for the business forever |
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Unit of Measure
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Everything is measured in U.S. dollars |
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Objective Evidence |
Invoices that state they actually paid for something
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Full Disclosure |
Reporting what is in your financial statements |
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Consistency |
Continuing the accounting methods
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Matching |
The revenue you bring in and the expense you pay to have to be recorded in the same month
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Conservatism |
Being conservative when making an estimate for your company |
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Materiality |
Inexpensive things are not worth keeping track of
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Accounts on Balance Sheet |
Assets, liabilities, and owner's equity
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Assets |
Things we own
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Liability |
Things we owe |
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Owner's Equity |
Difference between the two |
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Accounts on an Income Statement |
Revenues, expenses, net income
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Revenue |
Money that comes in |
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Expense |
Money that goes out
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Net Income |
What revenue exceeds expenses |
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Fundamental Accounting Equation |
Assets = Liabilities + Owner's Equity
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Debits v. Credits |
Debits appear on the left side of an account
Credits appear on the right side of an account |
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ALORE |
Assets: Increase with Debit; Decrease with Credit Liability: Increase with Credit; Decrease with Debit Owner's Equity: Increase with Debit; Decrease with Debit Revenue: Increase with Credit; Decrease with Debit Expense: Increase with Debit; Decrease with Credit |
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General Ledger |
Group of accounts previously kept page by page in a binder format |
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Trial Balance |
No more than a check to resume you are in balance |
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Cash Basis |
Recognize revenue when received
Recognize expenses when paid No adjusting entries made Violates the matching principle |
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Accrual Basis |
Recognize revenue when earned Recognize expenses when incurred Adjusting entries Allows for a meaningful analysis |
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Deferrals |
Adjustments for amounts previously recorded Previously recorded assets become expense Previously recorded liabilities become revenue |
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Accruals |
Adjustments for which no data has been previously recorded
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Straight Line Depreciation |
Expense = Cost - Salvage Value ----------------------------- Periods of Useful Life |
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Depreciation Expense |
Used to assess an asset over its useful life |
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Payroll Accrual |
Used to expense wages that have not been paid to employees for the last days of the month Expense = Wage Amount * Days Unpaid ------------------- Days in Pay Period |
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Failure to Make Adjustments |
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The Accounting Cycle |
1. Analyze transaction 2. Journal transactions 3. Post to ledger 4. Prepare trial balance 5. Prepare adjusting entries |
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Statement of Owner's Equity |
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Specialized Journals |
Sales Journal Cash Receipts Journal Purchases Journal Cash Disbursement Journal Payroll Journal |
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Sales Journal |
Always debits accounts receivable Sales on account |
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Cash Receipts Journal |
Always debits cash
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Purchases Journal |
Always credit accounts payable
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Cash Disbursement Journal |
Always credits cash All checks written except employee payroll checks |
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Payroll Jounral |
Always credits cash Employee paychecks only |
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Internal v. External Users |
Internal: Managers of company, more detail
External: Investors and creditors, summary level |
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Limitations of the Balance Sheet |
Less useful than income statement, are mainly based on judgement |
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Petty Cash |
Used for small, miscellaneous expenditures
Not a separate account on balance sheet, it is included in cash account |
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Five Reasons for Bank Reconciliation Differences |
1. Deposits in transit (Add to bank balance)
2. Outstanding checks (Deduct from bank balance) 3. NSF Checks (Deduct from book balance) 4. Bank service charges (Deduct from book balance) 5. Interest earned (Add to book balance) |
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Aging of Accounts Receivable Method |
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Inventory Control |
Separate control of inventory and inventory records
Physical inventory should be periodically taken |
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Periodic |
No continuous inventory records are kept so exact inventory is not known until a physical count is done
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Perpetual |
Continuous update to inventory as purchases are made and inventory is sold
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Formula to Find Gross Profit |
Gross Profit = Sales - Cost of Goods Sold |
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FOB Shipping Point |
Buyer pays shipping costs from seller's location
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FOB Destination |
Seller pays shipping costs to buyer's location
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Loss Contingency |
Liability is reasonably estimable
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Contingent Liability |
Liability based on some future event and cannot be reasonably estimated
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Fair Labor Standards Act (FLSA) |
Employers must keep records for time worked by hourly employees
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Revenue v. Capital Expenditures |
Revenue: Benefits within one year Capital: Benefits over more than one year |
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Methods of Depreciation |
Straight-line
Units of production Sum-of-the-years' digits Double declining balance |
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Straight-line Depreciation |
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Units of Production Depreciation |
Cost - Salvage Value
----------------------------- Useful Usage |
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Sum-of-the-Years' Digits Depreciation |
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Double Declining Balance Depreciation |
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Intangible Assets |
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Cash Equivalents |
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Statement of Cash Flows |
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Statement of Cash Flows Users |
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Management |
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Investors |
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Creditors |
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Classifications of Cash Flows |
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Operating Cash Flows |
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Investing Cash Flows |
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Financing Cash Flows |
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Direct Cash Flow Methods |
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Indirect Cash Flow Methods |
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