Acct 229 Exam 1

Front 1

Financing Activities

Back 1

how we get money. Borrowing or selling ownership interest

Front 2

Investing Activities

Back 2

Acquire resources to be used in day-to-day operations. Assets

Front 3

Operating Activities

Back 3

what our company does every day. Revenue and expenses

Front 4

Financial statement order

Back 4

Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flow

Front 5

Monetary Unit Assumption

Back 5

Only transactions that can be expressed in terms of money can be included in the accounting records. Record in USD since we are a company operating in US. Assume monetary unit is stable (ignore inflation and deflation)

Front 6

Economic Entity Assumption

Back 6

Activities of the business are separate from activities of the owners

Front 7

Time Period Assumption

Back 7

The long life of a company can be reported over a series of shorter time periods. Makes it possible to prepare the Income Statement for a specific time period

Front 8

Going Concern Assumption

Back 8

The company will not go out of business in the near future. Not liquidating

Front 9

Historical Cost Principle

Back 9

Record assets at the cost paid to acquire them. Leave them on your records at that amount

Front 10

Full Disclosure Principle

Back 10

Provide all information sufficiently important to influence a decision of buying stock in the company, investing, etc. Include footnotes in financial statements

Front 11

GAAP

Back 11

Generally Accepted Accounting Principles. Rules and assumptions under which financial statements must be prepared. Used in the US. Very rule-based

Front 12

Single-Step Income Statement

Back 12

Rev +Interest Rev + Gains from Sale of Assets = Total Lev and Gains - (Operating Exp + Loss on Sale of Assets + Interest Expense) = Net Income

Front 13

Statement of Retained Earnings

Back 13

Beg RE + Net Income - Dividends = End RE

Use when there are no changes in stock

Front 14

Balance Sheet

Back 14

Assets = Liab + Eq

Front 15

Statement of Cash Flow

Back 15

Shows the sources and uses of cash. (Operating, Investing, Financing)

Front 16

Sarbanes-Oxley (SOX) Act

Back 16

1. Penalties exist for management if financial statements are inaccurate, CEO & CFO must certify annual financial statements

2. Requires some directors to be independent of management

3. Requires audit committee members be independent of management

Front 17

Materiality

Back 17

the dollar magnitude of the transaction makes a difference in how it is recorded

Front 18

Multi-Step Income Statement

Back 18

Rev - COGS = Gross Profit - Operating Expenses = Income from Operations + Gains + Interest Rev - Losses - Interest Exp = Net Income before tax - Tax Expense = Net Income

Front 19

Gross Profit Ratio

Back 19

Gross Profit / Sales Rev

Front 20

Profit Margin

Back 20

Net Income / Sales Rev

Front 21

Statement of Stockholder's Equity

Back 21

Use if there are changes in stock.

Beg Eq (Beg CS and Beg RE) + New Stock + Net Income - Dividends = Eng Eq (End CS and End RE)

Front 22

Classified Balance Sheet

Back 22

separates assets and liabilities into current and noncurrent

Front 23

Current Asset

Back 23

1. Cash

2. MES - Marketable Equity Securities

3. AR

4. Inventory

5. Supplies

6. Prepaid Expenses

Front 24

Non-Current Assets

Back 24

1. Long-term Investments (over 1 yr)

2. Plant, Property, and Equipment

3. Intangible Assets

Front 25

Current Liabilities

Back 25

1. AP

2. Wage/Salary Pay

3. Unearned Rev

4. Notes Pay (short-term)

Front 26

Long-term Liabilities

Back 26

1. Notes Pay (long-term)

2. Mortgage Pay

3. Bonds Pay

Front 27

Shareholder's Equity parts

Back 27

Common Stock and Retained Earnings

Front 28

Recognition

Back 28

formally recording a transaction into the financial statements

Front 29

Measurement

Back 29

Quantify the transaction in terms of dollars at historical cost

Front 30

Cash Basis of Accounting

Back 30

Record revenue when cash is received, record expenses when cash is paid

Front 31

Accrual Basis of Accounting

Back 31

Record revenue when earned, record expense when incurred

Front 32

Deferred Revenue

Back 32

Company receives cash but revenue is earned later. (Unearned Rev)

Front 33

Deferred Expenses

Back 33

Company paid cash but the expense is used up later. (Prepaid Expense)

Front 34

Accrued Asset

Back 34

Company records rev when earned and receives cash later (AR)

Front 35

Accrued Liability

Back 35

Company records expense when used up and pays cash later. (AP)

Front 36

Closing Accounts process

Back 36

1. Close Rev to Income Summary

2. Close Exp to Income Summary

3. Close Income Summary to RE

4. Close Dividends to RE

Front 37

2 Accounting principles that form the basis of Accrual Accounting

Back 37

1. Revenue Recognition Principle

2. Matching Concept

Front 38

Revenue Recognition Principle

Back 38

tells us when to record revenues

Front 39

Matching Concept

Back 39

tells us when to record expenses