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Intro to ACCT 201

by: George Maxwell Miller

Intro to ACCT 201 ACCT 201

George Maxwell Miller
U of L
GPA 3.7

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This consists of basic information of accounting, such as About accounting, Ethics, concepts, principles and assumptions, the accounting equation, assets, liabilities, and MUCH more. This is fu...
Intro to Accounting 1
Accounting, ACCT, intro, basic, information, Basic information
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This 8 page Bundle was uploaded by George Maxwell Miller on Wednesday March 9, 2016. The Bundle belongs to ACCT 201 at University of Louisville taught by Johnston in Spring 2016. Since its upload, it has received 24 views. For similar materials see Intro to Accounting 1 in Accounting at University of Louisville.

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Date Created: 03/09/16
Intro to Accounting 03/09/2016 ▯ Accounting is the Language of Business ▯ ▯ Importance of accounting  Identifying  Recording  Communicating ▯ ▯ Users of Financial Information  External users  Internal Users ▯  Internal: People within the company that need access to the information ▯  External: lenders and shareholders (owners of Co.) ▯ ▯ Opportunities in Accounting  Financial o Preparation o Analysis o Consulting  Managerial o General accounting o For Co. o Treasurer  Taxation o Planning o Investigations o Enforcement o consulting  Accounting-related o Lenders o Consultants ▯ ▯ Ethics-A key concept ▯  Identify ethical concerns  Analyze options  Make ethical decision ▯ ▯ Fraud Triangle  Opportunity  Rationalization o Fails to see the criminal nature of the fraud  Financial Pressure o Bankruptcy, gambling, etc. ▯ ▯ Generally Accepted Accounting Principles (GAAP)  Aims to make information RELEVANT, RELIABLE, AND COMPARABLE. ▯ ▯ International Standards  International accounting standards board (IASB) o An independent group that issues standards  International financial reporting standards o Group that gives suggested practices, basically ▯ ▯ Conceptual Framework and Convergence  Objectives o To provice useful info to investors and others.  Qualitative Characteristics  Elements  Recognition and measurement Principles and Assumptions of Accounting  Principles o Measurement principle  Actual cost is objective. Everything is recorded at cost and kept at cost. o Revenue Recognition Principle  Revenue when earned  Proceeds to need not to be in cash  Measure revenue by cash received plus cash value of items received o Expense Recognition Principle  Expenses when incurred  A Company must record its expenses incurred to generate the revenue reported. o Full Disclosure Principle  A company is required to report the details behind financial statements that would impact users’ decisions  Assumptions o Going-Concern Assumption  The company is expected to continue business next period o Monetary Unit Assumption  Express transactions in monetary units (dollars) o Time period assumption  Presumes the life of a company can be divided into time periods, such as months and years (Monthly, quarterly, semi-annually, and annually). o Business Entity Assumption  The owner and the business should not “share” a checking account  Constraints o Materiality o (Benefit >)COST ▯ ▯ ▯ The Accounting Equation  Assets = Liabilities + Equity o Equity = Contributed Capital (common stock) and Retained Earnings (Cumulative profits and losses minus dividends)  Assets= Liability + Common stock – (Dividends + Revenues – expenses) o Revenue – Expenses = Net Income ▯ ▯ ▯ OR Assets – Liability = Equity ▯ OR Assets – Equity = Liability ▯ ▯ Financial Statement types:  ▯ ▯ ▯ A=L+E ▯ ▯ E=CS-Dividends+revenue-Expenses ▯ ▯ -Accounting cycle ▯ ▯ 1. Record Transactions in Journals ▯ 2. Post journal information to ledger accounts ▯ 3. Balance the books ▯ ▯ An account is a record of increases and decreases in a specific asset, liability, equity, etc. ▯ ▯ “receivable” = Asset ▯ ▯ Asset accounts: cash, account receivable, notes receivable, prepaid accounts, supplies, equipment, buildings, and land ▯ ▯ Liability accounts: Accounts payable, notes payable, unearned revenue, accrued liabilities. ▯ ▯ “Chart of accounts” is a list of account numbers related to specific things ▯ ▯ A T-account represents a ledger account and is a tool to understand the effects of one or more transaction: Debit (Left Side) & Credit (Right Side) ▯ ▯  Assets (Debits +) = Liabilities (Credit +) + Equity (Credit +)  ^ ^ ^  (De: + / Cr: -) (De: - / Cr: +) (De: - / Cr: +) ▯ ▯ ▯ Sales+discounts+returns and allowances= Net sales ▯ ▯ Net sales – Cost of goods sold = gross profit ▯ ▯ Sales of Merchandise  Each sale transaction involves revenue and cost ▯ ▯ Zmart sold $2400 of merchandise on credit and the cost of that inventory was $1200 ▯ ▯ Sales returns and allowances  Usually involves dissatisfied customers and possibility of lost future sales  Sale allowance refers to reduction in the selling price  Return is when the customer return the product o This reduces revenue by debiting allowances and crediting accounts receivable ▯ ▯ Accounts receivable ▯  Sales on Credit=Debit to accounts receivable/credits sales ▯  Crdit card sales=credit cards increase purchases o Advantages are as follows:  Sales increase by providing purchase options to the customer  Cash collections are quicker  Customers credit is evaluated by the credit card issuer  The risks of extending credit are transferred to the credit card issuer ▯ ▯ ▯ Credit card sales ▯  Installment Accounts receivables: o Amounts owed by customers from credit sales for which payment is required in periodic…… ▯ ▯ ▯ 07-P1: Valuing accounts receivable ▯  Two methods for accounting bad debts: o 1) Direct write off method (not in align with GAP. Only used for tax purposes) o 2) Allowance method (method you’ll have to use) ▯ ▯ Direct write-off rd  EXAMPLE: TechCom determines on jan 23 that it cannot collect $520 owed to it by its customer… o Bad Debts expense………. Dr. 520 o Account receivable………… Cr. 520 ▯ ▯ ▯ What happens if a customer comes back and makes payment? ▯  Reverse what you previously did: o Cash………………dr. 520 o Accounts receivable-Kent………….cr. 520 ▯ ▯ ▯


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