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ACC 211, Exam #1

by: ronniejohnson13

ACC 211, Exam #1 ACC 211

GPA 3.573

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These notes cover everything in Chapters 1-4. This is everything you need to know for the first Exam.
Principles of Financial Accounting
Manuel Sicre
Study Guide
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This 4 page Study Guide was uploaded by ronniejohnson13 on Tuesday February 9, 2016. The Study Guide belongs to ACC 211 at University of Miami taught by Manuel Sicre in Summer 2015. Since its upload, it has received 117 views. For similar materials see Principles of Financial Accounting in Accounting at University of Miami.


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Date Created: 02/09/16
Exam  #1     Chapter  1     4  Basic  Financial  Statements   -­‐ Balance  Sheet  (Point  in  time)   -­‐ Income  Statement  (first  prepared)   -­‐ Statement  of  Stockholder’s  Equity   (Period  of  time)   -­‐ Statement  of  Cash  Flows     Basic  Accounting  Equation     Assets     =   Liabilities   +   Stockholder’s  Equity   tte r m   Cash       Debt       Residual  Value   S h o r­‐ Supplies     Obligation   Inventory   Retained  Earnings   (net  income  –  dividends  paid)   Equipment   Paid  in  capital  (stock)   Real  estate     Asset:  something  owned  with  future  probably  economic  value   Liability:  debt  of  obligation  based  on  past  transactions   Stockholder’s  Equity:  residual  value  of  the  company   Retained  Earnings:  leftover  earnings  after  dividends  are  paid     Revenues   -­‐   Expenses   =   Net  Income/Loss     Cash  Basis  of  Accounting:  Small  privately  held  companies,  recognize  when  cash  is   paid  or  cash  is  received.   Accrual  Basis  of  Accounting:  Required  by  GAAP  for  publicly  held  companies,  record   transactions  when  revenue  is  earned  and  expenses  when  incurred.     GAAP:  Generally  Accepted  Accounting  Principles  –  to  achieve  consistency  in  the  U.S.   FASB:  Financial  Accounting  Standards  Board  –  writes  GAAP   IASB:  International  Accounting  Standards  Board   IFRS:  International  Financial  Reporting  Standards   SEC:  Securities  and  Exchange  Commission  –  enforces  GAAP   PCAOB:  Public  Company  Accounting  Oversight  Board   s CPA:  Certified  Public  Accountant  –  check  company  books  to  reduce  information  risk   p o  t FORM  10K:  annual  report   C   FORM  10Q:  quarterly  report   S E FORM  8K:  “official  gossip  of  the  company”         Chapter  2     Accounting  Information:   -­‐ Relevant:  capable  of  influencing  decisions   -­‐ Faithful  Representation:  complete,  neutral,  free  from  error     Influence  Information:   -­‐ Comparability   -­‐ Verifiability   -­‐ Timeliness   -­‐ Understandability     Account:  monetary  activity  of  transactions  for  individual  accounts   Chart  of  Accounts:  list  of  all  account  titles  and  their  unique  numbers     Transaction  Analysis   1. Every  transaction  affects  at  least  two  accounts  (Dual  Effects)   2. The  account  must  remain  in  balance     Par  Value:  minimum  amount  a  stockholder  must  contribute  (meaningless)   General  Journal:  process  of  recording  economic  transactions   General  Ledger:  records  where  all  the  organization’s  accounts  are  listed     Direction  of  Transactions     Debit   Credit   Asset   Increase   Decrease   Liability   Decrease   Increase   Stockholder’s  Equity   Decrease   Increase   Revenues   Decrease   Increase   Expenses   Increase   Decrease       Compound  Entry:  affects  more  than  two  accounts   Trial  Balance:  list  of  names  of  all  T-­‐Accounts  with  two  columns  (debit  &  credit)     Statement  of  Cash  Flows   1. Financing   2. Investing   3. Operating                 Chapter  3     Issues  in  Periodic  Reporting   -­‐ Recognition  Issues  (when)   -­‐ Measurement  Issues  (what  amounts)     Elements  of  the  Income  Statement   -­‐ Operating  Revenues:  increase  in  assets  or  settlement  of  liabilities   -­‐ Operating  Expenses   o Expense:  use  of  economic  resources   o Expenditure:  usage  of  cash  (cash  flow)   o Typical  Operating  Expenses:   ▯ Materials,  salaries,  occupancy,  general  and  administrative,   depreciation,  marketing,  advertising,  etc.   ▯ Income  Tax  Expense     Earnings  Per  Share  (EPS)     Net  Income  –  Dividends  to  Preferred  Stockholders   Weighted  Average  Number  of  Shares  of  Common  Stock  O/S     Revenue  Realization  Principle   1. Product  delivered  or  service  provided   2. A  “persuasive”  agreement  in  place  for  customer  payment   3. Price  has  been  determined   4. You  expect  to  get  paid     Expense  Matching  Principle   -­‐ Revenue  and  Expense  are  recorded  at  the  same  time     Transaction  Analysis  Rules   1. Was  a  revenue  earned  or  expense  incurred   2. If  not,  what  was  received  or  given   3. Identify  the  accounts  affected  by  the  transactions   4. Determine  the  direction  of  the  effect  (increase  or  decrease)   5. Is  the  accounting  equation  in  balance     Net  Profit  Margin:   Net  Income   Net  Sales  (Operating  Revenues)     Common  Size  Statements   -­‐ Balance  Sheet  and  Income  Statement  are  presented  in  percentages  to   evaluate  companies  with  different  dollar  sizes       Chapter  4     Auditors   -­‐ Assure  the  accuracy  of  financial  records   -­‐ Evaluate  appropriateness  of  estimates  and  accounting  principles  used  by   management  in  determining  revenues  and  expenses     The  Accounting  Cycle   1. Analyze  transactions   2. Record  journal  entries  in  the  general  journal   3. Post  amounts  to  the  general  ledger   4. Prepare  a  trial  balance  to  determine  if  debits  equal  credits   5. Adjust  revenues  and  expenses  and  related  balance  sheet  accounts   6. Prepare  a  complete  set  of  financial  statements  and  disseminate  it  to  users   7. Close  revenues,  gains,  expenses,  and  losses  to  Retained  Earnings     CASH  IS  NEVER  ADJUSTED     Deferred  Revenues  (cash  received  prior  to  service  performed/  product  delivered   Dr.  Cash           Dr.  Unearned  Revenues     Cr.  Unearned  Revenues       Cr.  Revenues     Accrued  Revenues  (revenues  have  been  earned  but  not  yet  received)   Dr.             Dr.  Revenues     Cr.             Cr.  Receivables     Deferred  Expenses  (cash  was  paid  in  advance  of  service/product)   Dr.  Prepaid  Asset         Dr.  Asset/Expense     Cr.  Cash           Cr.  Prepaid  Asset     Accrued  Expenses  (expenses  have  been  incurred  but  not  yet  paid)   Dr.             Dr.  Expenses     Cr.             Cr.  Payables     Interest  on  Debt   1. Principle  (amount  borrowed  or  loaned)   2. Interest  (the  cost  of  borrowing  or  lending)     Principle  X  Interest  Rate  X  Time     Total  Asset  Turnover  Ratio     The  higher  the   Net  Sales  (Operating  Revenues)     ratio,  the  better   Average  Total  Assets    


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