Exam 1 Study Guide
Exam 1 Study Guide ACC 212
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This 7 page Bundle was uploaded by Katelyn Notetaker on Tuesday October 20, 2015. The Bundle belongs to ACC 212 at Grand Valley State University taught by Dunn in Fall 2015. Since its upload, it has received 58 views. For similar materials see Principles of Financial Accounting in Accounting at Grand Valley State University.
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Date Created: 10/20/15
Accounting Exam 1 Review 9 6 9 6 Given a company description e g something like a dental clinic an auto maker an airline an accounting firm etc be able to identify its main type of business e g retailer manufacturer service provider etc 0 Supplier raw material 0 ManufacturerProducer produces goodsfinished product 0 DistributerWholesaler buys finished product from manufacturerproducer 0 Retailers buys product through distributerwholesaler 0 Service Companies transportation companies trucks mail service ect Know what it means to own stock in a company what is the definition and what rights do owners have 0 Share of Stock is a certificate that acts as evidence of ownership in a corporation 0 Voting power on major issues ownership in portion of a company 0 Right to transfer ownership 0 Entitlement to dividends if company declares them 0 Ability to inspect corporate books and records 0 Right to sue for wrongful acts 0 Stockholders have limited liability if the company goes bankrupt stockholders lose their invested money Identify the definitions of revenues expenses assets liabilities andor owners equity 0 Revenues in ow of assets resulting from the sale of goods and services PROFIT 0 Expenses out ow of assets resulting from the sale of goods and services BUSINESS COSTS 0 M a future economic benefit cash accounts receivable equipment land buildings automobiles ect 0 Liabilities an obligation of business accounts payable notes payable expenses wages dividends ect 0 Owner s Equitv owner contributions revenue capital stock retained earnings Distinguish between internal and external users of financial statements identify examples of each 0 Internal User management 0 External User employees anyone outside the company investors financial advisors customers and authorities Given net income dividends and beginning retained earnings be able to calculate ending retained earnings 0 Statement of Retained Earnings 0 Beginning retained earnings Net Income Dividends Ending retained earnings Solve for various components of the accounting equation given other components and possibly manipulations of them similar to Exercise 14 in the Porter amp Norton textbook 0 The accounting equation 0 Assets Liabilities aner s Equity Identify or define one or more of the assumptions made in the preparation of financial statements ie the conceptual framework for accounting 0 Economic Entitv Concept requires that an identifiable specific entity be the subject of a set of financial statements 0 Time Period Assumption assume it s possible to prepare an income statement that accurately re ects net income or earnings for a specific time period 0 Going concern assume business is not in the process of liquidation and that it will continue indefinitely into the future Know the purpose of the AICPA AAA SEC FASB andor the IASB 0 AICPA American Institute of Certified Public Accountants designated for those who have passed a uniform exam and met other requirements 0 Advises the FASB and in the past was involved in setting the auditing standards to be followed by public accounting firms 0 AAA American Accounting Association community of accountants 0 SEC Securities and Exchange Commission Government agency that has complete control to make rules for preparing statements 0 FASB Financial Accounting Standards Board Sets accounting standards 0 IASB International Accounting Standards Board Worldwide accounting standards List the factors you should consider when selecting between the best alternatives regarding an ethical dilemma in accounting 0 If the information is both relevant and a faithful representation its quality is good 0 How will the decisions affect others inside the company and out 0 Who may benefit or be harmed 0 How likely are they to benefit or be harmed 0 What rights or claims may be violated 0 What specific interests are in con ict 0 What are my responsibilities and obligations Describe the purpose of financial reporting 0 To help the users reach their decisions in an informed manner List and define each of the usefulqualitative characteristics of accounting information e g comparability consistency materiality etc amp be able to recognize them applied in example scenarios 0 Understandabilitv the quality of accounting information that makes it comprehensible to those willing to spend the necessary time 0 Relevance the capacity of information to make a difference in a decision 0 Faithful Representation the quality of information that makes it complete neutral and free from error 0 Comparability the quality that allows a user to analyze two or more companies and look for similarities and differences 0 Consistency the quality that allows a user to compare two or more accounting periods for a single company 0 Materiality the magnitude of an accounting information omission or misstatement that will affect the judgment of someone relying on the information 0 Conservatism the practice of using the least optimistic estimate when two estimates of amounts are equally likely Given various account balances calculate current ratio andor working capital 0 Current ratio Current Assets Current Liabilities 0 Working Capital Current Assets Current Liabilities 0 Profit Margin Net Income Net Sales Know the purpose format and content of the multiple step income statement 0 For the year 2014 Sales Cost of Goods Sold COGS 0 Operating Expenses sum I 0 Gross Profit Total Operating Expenses o Interest sum but expenses gets subtracted 0 Income from Operations Other Revenues and Expenses 0 Income before Taxes Income Tax Expense Know which financial statement a user should look at to evaluate the answers to various types of questions 0 Balance Sheet Asset on left Liabilities and Owner s Equity on right 0 A L OE 0 Income statement Revenue Expenses Net Income 0 Statement of Retained Earnings Beginning Retained Earnings Net Income Dividends Ending Retained Earnings 0 Statement of Cash Flows Summarize operating investing and financing activities for a company Be able to ascertain the effect on various accounts of an accounting journal entry being made or failing to be made Given cash ow data e g beginning or ending balance and cash ows for operating investing andor financing activities be able to calculate the increasedecrease in cash or the balance of cash Know which source documents are used to represent which types of business activities 0 Invoice received from a supplier is the source document for purchase of inventory on credit 0 Cash Register Tape is used by a retailer to recognize a cash sale 0 Time Cards are used to document workers times to record their wages Be able to describe a transaction from both parties perspectives as to what accounts would be affected e g a sale to the seller is a revenue that same transaction is a purchase to the buyer and is either an asset or an expense depending on what is purchased Identify the effects of various types of transactions on the accounting equation 0 Issuance of capital stock Cash Assets and Owner s Equity Capital Stock 0 Acquisition of property in exchange for a note Building amp Land Assets and Notes Payable Liability 0 Acquisition of equipment on an open account Equipment Assets and Accounts Payable Liabilities 0 Sale of monthly memberships on account Accounts Receivable Assets and Retained Earnings Owner s Equity 0 Sale of court time for cash Cash Assets and Retained Earnings Owner s Equity 0 Payment of wages and salaries Cash Assets Negative input and Retained Earnings Owner s Equity Negative input 0 Payment of utilities Cash Assets Negative input and Retained Earnings Owner s Equity Negative input 0 Collection of accounts receivable Cash Assets and Accounts Receivable Assets Negative input 0 Payment of dividends Cash Assets Negative input and Retained Earnings Owner s Equity Negative input Explain the process of doubleentry accounting 0 TChart doubleentry accounting is a system where every transaction is recorded twice usually with a TChart and a general ledger Explain the rules of debit and credit entries for various types of accounts 0 TChart left side is debit right side is credit 0 DEAD Debit Expenses Assets and Dividends 0 Everything else is Credit Liabilities Capital Stock Retained Earnings Revenues Identify what type of balance debit or credit are normally had by various types of accounts 0 Assets Debit DEAD 0 Liabilities Credit 0 Capital Stock Credit 0 Retained Earnings Credit 0 Revenues Credit 0 Expenses Debit DEAD 0 Dividends Debit DEAD Explain how a general journal works 0 General Journal a journal used in place of a specialized journal 0 Tools for the accountant Explain what a general ledger is and how general journals are used to update general ledgers 0 General Ledger a book file hard drive something containing all accounts like a file cabinet or the documents tab on your computer Identify the journal entry needed to record various financial transactions Explain the purpose and formats of accounts balance sheets classified and nonclassified charts of accounts general journals general ledgers income statements single and multistep statements of cash ows statements of retained earnings and trial balances 0 Asset on left Liabilities and Owner s Equity on right 0 O Classified Current within a year and Noncurrent Assets and Liabilities 39 Current Assets Cash Marketable Securities Accounts Receivable Inventory Prepaid rent insurance Supplies I Noncurrent Assets Investments property plant and equipment intangible assets franchise agreement I Current Liabilities Accounts payable salaries and wages payable income taxes payable interest payable bank loan payable I Noncurrent Liabilities Longterm debt notes payable due in more than one year O SingleStep Income Statement I Revenues Expenses Net Income 0 MultiStep Income Statement I Sales Cost of Goods Sold COGS Gross Profit I Operating Expenses sum Total Operating Expenses I Gross Profit Total Operating Expenses Income from Operations I Other revenues and expenses Interest sum but expenses gets subtracted I Income from Operations Other Revenues and Expenses Income before Taxes I Income before Taxes Income Tax Expense Net Income 0 Statement of Retained Earnings 0 Statement of Cash Flows O Summarize activities for a company 0 Chart of Accounts 0 Numerical list of all the accounts an entity uses I Number levels 100 110 120 ect I Organizes by Owner s Equity Revenues Expenses Identify transactions as financing investing and operating 0 Financing borrowing sale of stock 0 Investing purchase andor sale of assets that lasts longer than a year 0 Operating sale of productsservices costs incurred to operate business Be able to classify accounts as current assets noncurrent assets current liabilities noncurrent liabilities revenues expenses stockholders equity or dividends 0 Current Assets Cash Marketable Securities Accounts Receivable Inventory Prepaid rent insurance Supplies 0 Noncurrent Assets Investments property plant and equipment intangible assets franchise agreement 0 Current Liilbiliti Accounts payable salaries and wages payable income taxes payable interest payable bank loan payable 0 Noncurrent Liilbiliti Longterm debt notes payable due in more than one year 0 Revenues profit by way of retained earnings 0 Expenses operating costs by way of retained earnings 0 Dividends stockholder s profit by way of retained earnings 0 Owner s Equity capital stock m retained earnings One 10 point problem will give you a list of accounts and it will either require you to create a or it will require you to create a 0 MultiStep Income Statement 0 For the year 2014 Sales Cost of Goods Sold COGS Gross Profit Operating Expenses sum Total Operating Expenses Gross Profit Total Operating Expenses Income from Operations Other revenues and expenses Interest sum but expenses gets subtracted Income from Operations Other Revenues and Expenses Income before OOOOO Taxes 0 Income before Taxes Income Tax Expense Net Income 0 SingleStep Income Statement 0 Revenues Expenses Net Income The other 10 point problem will give you a list of accounts and it will either require you to create a or it will require you to create a 0 Balance Sheet Asset on left Liabilities and Owner s Equity on right 0 A L OE O Classi ed Current within a year and Noncurrent Assets and Liabilities 39 Current Assets Cash Marketable Securities Accounts Receivable Inventory Prepaid rent insurance Supplies 39 Noncurrent Assets Investments property plant and equipment intangible assets franchise agreement 39 Current Liilbiliti Accounts payable salaries and wages payable income taxes payable interest payable bank loan payable Noncurrent Liilbiliti Longterm debt notes payable due in more than one year
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