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Financial Accounting Study Guide I

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by: Iveta Hristova

Financial Accounting Study Guide I Acct 203

Marketplace > College of Charleston > Math > Acct 203 > Financial Accounting Study Guide I
Iveta Hristova
C of C
GPA 2.6

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Study Guide for the first ever exam of the semester!
Financial Accounting
William VanDenburgh
Study Guide
50 ?




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This 3 page Study Guide was uploaded by Iveta Hristova on Wednesday February 3, 2016. The Study Guide belongs to Acct 203 at College of Charleston taught by William VanDenburgh in Spring 2016. Since its upload, it has received 55 views. For similar materials see Financial Accounting in Math at College of Charleston.


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Date Created: 02/03/16
Accounting 203 Study Guide I Exam: 16 Feb Financial Statements 1. Income Statement R – E = NI Revenue – Expenses = Net Income  Revenue = credit  Expense = debit 2. Statement of Retained Earnings BRE ± NI – DIV = ERE Beginning Retained Earnings ± Net Income – Dividends = End Retained Earnings 3. Balance Sheet A = L + SE Assets = Liabilities + Stockholder’s Equity A point in time, all others are for a period in time 4. Statement of Cash Flow Operating ± Financing ± Investing Debit = Credit Asset +($ you have) -($ you owe) Liability - + Stockholder’s Equity - + Revenue - + Expenses + -  Accounts Payable – informal agreements, promises, smaller amounts, SHORT term (±12 months)  Notes Payable – formal agreements, signed documents, LONG term (over 12 months)  Accounts Receivable – is service is provided but no cash is yet received, then Accounts Receivable A+, Service Revenue R+, SE+  Cash Basis – revenues when cash is received and spent.  Accrual Basis – revenues when they are earned and expenses in the same period as revenues to which they relate, regardless of point in time.  Trial Balance: Make sure A = L + SE is in balance by adding up the ending balances in the T- accounts.  Classified Balance Sheet: Includes the current assets and liabilities.  Change in Assets: A+ and A-, but no change in the Total Assets  Permanent Account: Balance Sheet accounts (assets, liabilities, equity)  Temporary Account: Income Statement accounts (expenses, revenues, dividends)  Gift Cards: Unearned revenue -when they are issued, they are considered a Liability -when they are redeemed, Sales Revenue+, SE+  Operating Cycle: buying goods and services from suppliers and employees, selling goods and services to customers and collecting $ - primary source of Revenue and Expenses.  Revenue Recognition Principle: revenues should be recognized when they are earned -receive cash before sale/service = unearned revenue -receive cash with sale/service = cash & revenue reported -sale/service first and receive cash after = accounts receivable  Expense Recognition Principle: expenses are recognized in the same period as the revenues to which they relate (accrual basis) -receive cash before expense = do not report -receive cash with expense = report -expense occurs first, cash is received after = accounts payable  Accumulated Depreciation (credit) – balance sheet, recorded for use of equipment  Contra-account – keeps track of the accumulated depreciation (+xA is –A)  Depreciation Expense (debit) – income statement  Amortization – similar to depreciation, but for software The Accounting Cycle 1. Analyze  Duality of Effects (give & receive)  A = L + SE must balance 2 & 3. Record and Summarize  Record journal entries -What is debit? What is credit? What has increased and what has decreased?  Summarize ledger accounts -T-accounts Journal Entries Insert debits first Indent credits An exchange of only promises is not a transaction so no journal entry is required List assets first, in order of liquidity (cash is always first) List liabilities in order of maturity “Current” assets/liabilities mean within 12 months Current ratio = current assets/current liabilities Adjustment Entries  Never involve cash  Always at the end of the month  Always include 1 balance sheet & 1 income statement Deferral Adjustments  Decrease Balance Sheet accounts and increase corresponding Income Statement accounts  Each adjustment involves 1 Asset & 1 Expense, or 1 Liability & 1 Revenue account Accrual Adjustments  Record Revenue and Expenses when they occur prior to receiving or paying cash and adjust corresponding Balance Sheet accounts  Involve 1 Asset & 1 Revenue account, or 1 Liability & 1 Expense account Adjusted Trial Balance List in order of liquidity, most often in this order: -Cash -Accounts Receivable -Supplies -Prepaid Rent -Equipment -Accumulated Depreciation


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