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## Accounting 131 test 1 studyguide chapters 1-4

by: Leighton Browne

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# Accounting 131 test 1 studyguide chapters 1-4 131

Marketplace > Illinois State University > Accounting > 131 > Accounting 131 test 1 studyguide chapters 1 4
Leighton Browne
ISU
GPA 3.7

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These notes outline all the concepts from chaptes 1-4
COURSE
Financial Accounting
PROF.
Charles Thomas
TYPE
Study Guide
PAGES
3
WORDS
CONCEPTS
Accounting
KARMA
50 ?

## Popular in Accounting

This 3 page Study Guide was uploaded by Leighton Browne on Sunday February 7, 2016. The Study Guide belongs to 131 at Illinois State University taught by Charles Thomas in Spring 2016. Since its upload, it has received 34 views. For similar materials see Financial Accounting in Accounting at Illinois State University.

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Date Created: 02/07/16
Chapter 1­ Financial Statements    1. Income Statement(total period of Profitability)  ­revenues & expenses  ­single step OR multi­step    2.Statement of Retained Earnings (Profitability)  ­change in balance from 1 period to the next  ­Net Income, Net Loss, Dividens Paid    3.Balance Shee​ t (snapshot in time) (Liquidi​yA = L + SE  ­Assests  current expected to be used up in 1 year, cash, inventory  longterm: beyond 1 year, real estate, equipment, build material  intangible trademark, franchise, patent  ­Liabilities(creditors/sources)  Bank: note payable  Vendor/supplies: Account payable  Employees: Wage Paid  ­Stockholders Equity  Common Stock​ /Contrib Capital  Retained Earnings: Rev, Exp, Div    ­Working Capital= current assests ­ current Liab  ­Current Ratio= current assests / current Liab  ­Net Profit Margin= net income / sales revenue  (x100 for a %)  4. Statement of Cash Flows  ­investing activities  ­financing activities  ­opportunity activities      Annual Report  1. notes to Financial  Statement­­>full disclosure and clarity detail  2.Managment Discussion/Analysis→ the Risks to company  3.Auditors Report→ audit books exam records and F/S. must be independent of company. checks GAAP      Chapter 2­ Accounting Information System    GeneralAcceptedAccountingPrinciples  ­Accounting Rules  ­Designed to disclose buisness performance and inform clients  ­measurements become part of F/S  ­complete the Accnt Cycle    FinancialAccountingStandardsBoards  ­Create Basic Objectives of Financial Reporting  objectives:  provide info useful to investors/creditors to make decisions  asses the amount/timing/risk of the buisness cashflows  about bbuis assests, claims on assessts, changes through time  Characteristics of Accounting Info  1.Primary Qualities  Relevance:​  influence decisons of user  ­predicted value ­confirmtory value ­materiality  Faithful Representation  ­completeness ­free of error ­neutral info/ unbias    2.Secondary/Enhancing Qualities  ­Comparibility: info measured in a similar manner by diff. companies thats considered imparable  Consistency: achieved when same accnt rules are applied to same items through time  ­Verifiability: agreement of the acitivity between parties  ­Timliness  ­Understandability:  Assumptions  Economic Entity­​ company is acccounted for sepeart from owners own transactions  Continuity­ Going concern of lasting long enough to fulfill going commitments  Time Period­​ divided into time periods to make assumptoins  Monetary Unit­ financial results reported in monetary units, so excludes customary satisfac etc.  Principles  Historical Cost Principle faithful representation of value when it was purchased  Revenue Recognition Principle​ ­ when to record revenue, in the time period or relevative guarentee  Expense Recognitoin(matching)­ ​ only recorded with what revenue it helped produce ^^^  Conservatism­ take care in overstating understating      General Ledger​ ­ each account has own pages to track balance and activity  1. Assests, LIab, SE, Rev, Exp    IN THAT ORDER    Double Entry System  ­when you record a cash sale, you also record a Revenue sale.  1. 1 or more accnts Dr/Cr 2. total \$ must equal Dr=Cr    Assests  Cash/ Investments/ Accnt Recieveable/inventory/land/building/equip/patent/copyright  Liabilities  Accnt payable/salaries/unearend sales rev/ intrest pay/ income tax/ notes/ bonds  SE  Common Stock Retained Earn  Revenue  sales revenue, intrest income, rent revenue  Expense  CofGS, salaries expense, rent E, Insure E, Depreciat E, Ad E, Utilites Ex, Repairs, Property Tax    Debit Credit  Expenses Revenue  Assets Liab  Dividens Stockholder Equity      Chapter 3­ Accrual Basis of Accounting→ ​ GAAP accepted  ­revenue is recognized as it is earned and expenses recognized when they are incurred.  ­cash and non cash transactions, superior becasue focuses on selling  Time­Period Assumption: ​ divides into specific periods, month a quarter or a year  Revenue Recognition Principle: ​ revenue earned, collelction of cash reasonably assured  Matching Expense Principle: record expenses of that period of which ONLY helped generate the rev        Cash­Basis of Accounting→   ­revenue is recorded when cash is recieved, regardless of when it is earned  ­expenses is recorded when cash is paid, rather than when it is inccured        Adjusting Journal Entries    1. Deferral/Prepayment  ­buisness recieves cash, but doesnt recognize the revenue right away because rev hasnt been EARNED YET,  unearned starts as liability and moves to revenue        2. The buisness pays cash, but doesnt recognize the expense right away becasue the expense has not  been used up yet  ­prepaid items, Longterm Assests, Supplies­> start as Assests move to Expenses as used\

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