New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Study Guide for first BMGT220 Midterm

by: bmgt220notetaker

Study Guide for first BMGT220 Midterm BMGT220

Marketplace > University of Maryland - College Park > BMGT220 > Study Guide for first BMGT220 Midterm


Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

These notes cover chapters 1, 2, 3, and 5.
Dr. Basu
Study Guide
50 ?




Popular in Accounting

Popular in Department

This 7 page Study Guide was uploaded by bmgt220notetaker on Monday February 15, 2016. The Study Guide belongs to BMGT220 at University of Maryland - College Park taught by Dr. Basu in Winter 2016. Since its upload, it has received 377 views.


Reviews for Study Guide for first BMGT220 Midterm


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 02/15/16
Accounting Exam 1 Study Guide Chapter 1: I. Nature of Business & Accounting 1. business ­ organization in which basic resources, such as materials and labor  provide output 2. profit ­ difference between amounts received from customers and amount paid for  inputs A. 3 types of business 1. Service business ­ provide services rather than products to customers 2. Merchandising business ­ sell products they purchase from other business to  customers 3. Manufacturing business ­ change basic inputs into products sold B. Accounting ­ information system that provides reports to users about economic activities 1. Accounting as an information system a) Identify users b) Assess users information needs c) Design accounting information system to meet users’ needs d) Record economic data about business activities and events e) Prepare accounting reports for users 2. Types of accounting a) Managerial accounting ­ internal users of accounting info b) Private accounting ­ managerial accounts employed by a business c) Prepare accounting reports for users C. General purpose financial statements 1. financial accounting report that is distributed to external users D. Ethics ­ moral code of conduct 1. Sarbanes­Grey Act of 2002 ­ created Public Company Accounting Oversight Board 2. public accounting ­ accounting provides service on fee basis 3. GAAP ­ generally accepted accounting principles follow FASB (Financial Accounting  Standards Board) II. Business Entity Concept ­ limits data in an accounting system to data related to business  activities E. Types of Entities 1. Proprietorship ­ owned by 1 individual (70% of all businesses)  a) easy, cheap, all profit goes to owner; limited resources, full liability 2. Partnership ­ is owned by 2 or more partners (10% of all businesses)  a) combines skill, share liability, partner can buy out; split revenues 3. Corporation ­ a company authorized to act like its own legal entity (20% of all  businesses and 90% of all business revenues) a) legal entity which shields owners from liability, pays taxes, sell shares of stock 4. Limited Liability Company ­ partnership that functions like a corporation F. Accounting Equation 1. Assets ­ resources a business owns (e.g. cash, land, buildings, equipment) 2. Liabilities ­ rights of creditors to claim assets 3. Stockholders/Owner’s Equity ­ rights of owners to claim assets  1. Assets = Liabilities + Stockholders’ Equity Chapter 2: I Using Accounts to Record Transactions G. Account ­ separate record that shows increases & decreases in accounting equation a) Title ­ name of accounting equation element recorded in account b) space for recording increases in the amount of the element c) space for recording decreases in the amount of the element 1. T­account ­ left side = debit, right side = credit 2. Dead Colr ­ mnemonic device to remember whether to debit or credit increases in an account a) Debit ­ Expenses, Assets, Dividends b) Credit ­ Owner’s Equity, Liabilities, Revenues 2. balance of the account ­ excess debits or credits a) debit balance = excess debits, credit balance = excess credits H. Chart of Accounts 1. ledger ­ group of accounts for a business entity 2. chart of accounts ­ list of accounts in that ledger, in order that they appear 3. Balance sheet ­ Assets ­> Liabilities ­> Owner’s Equity 4. Income Statement ­ Revenues, Expenses 5. Assets ­ resources owned by business (e.g. Cash, Supplies, Accounts Receivable,  Prepaid Expenses, Land) 6. Liabilities ­ debts owed to creditors (e.g. Accounts, Notes & Wages Payable,  Unearned Revenue) 7. Owner’s Equity ­ stockholders’ rights to assets ­ balance of capital stock and retained earnings 8. Revenues ­ increases in equity as a result of selling products to customers (e.g. Rent Revenue, Fees Earned) 9. Expenses ­ using up assets or services (e.g. Wages expense, Rent Expense,  Utilities Expense, Supplies Expense, Miscellaneous Expenses) I. Balance Sheet Account Order 1. Assets ­ Cash, Accounts Receivable, Supplies, Prepaid Insurance, Land, Office  Equipment 2. Liabilities ­ Accounts Payable, Unearned Rent 3. Stockholders’ Equity ­ Capital Stock, Retained Earnings, Dividends J. Income Statement Order 1. Revenue ­ Fees Earned, Rent Revenue 2. Expenses ­ Wages Expenses, Rent Expense, Utilities Expense, Supplies Expense,  Misc. III. Double­Entry Accounting System 1. double­entry system ­ based on accounting equation 2. every business transaction recorded in at least two accounts 3. total debits recorded for each transaction = total credits recorded K. Balance Sheet Accounts 1. Assets ­ debit for increase, credit for decrease 2. Liabilities ­ debit for decrease, credit for increase 3. Equity ­ debit for increase, credit for decrease L. Income Statement Accounts 1. Revenue ­ debit for decrease, credit for increase 2. Expense ­ debit for increase, credit for decrease M. Dividends 1. Dividends ­ debit for increase, credit for decrease N. Journalizing 1. journal ­ where transactions are originally entered and recorded 2. e.g.    Nov. 5         Land                    (debit­>)    20000              Cash              (credit­>)      20000   3.       Term                                                          Debit                           Credit                  a) Received cash for services provided        Cash                           Fees Earned b) Services provided on account                   Accounts Rec.            Fees Earned c) Received cash on account                        Cash                           Accounts Rec.   d) Purchased on account                              Asset Account             Accounts Pay. e) Paid on account                                        Accounts Payable       Cash f) Paid cash                                                  Asset/Expense            Cash g) Issued capital stock                                  Cash                            Capital Stock h) Paid dividends                                          Dividends                     Cash IV. Posting Journal entries to Accounts 1. posting ­ transferring debits and credits from journal entries to accounts O. Trial Balance ­ method to check that debits = credits P. Errors 1. transposition & sliding 2. unposted Chapter 3: I Nature of the Adjusting Process 2. Accounting period concept ­ revenues/expenses reported in correct period 3. Accrual basis of accounting ­ revenues reported only after they are earned 4. Revenue recognition concept ­ revenue reported after service/product provided 5. matching concept ­ report revenues and related expenses in same period Q. The Adjusting Process 1. Some expenses are not recorded daily because they don't need to be 2. Some revenues and expenses are incurred as time passes rather than separate  transactions 3. some revenues and expenses may be unrecorded, such as unpaid wages R. Types of Accounts Requiring Adjustment 1. Prepaid Expenses a) advance payment of future expenses are recorded as assets when cash is paid b) become expenses over time or during normal operations c) Transaction: Cash is paid for prepaid expense (cash credited, prepaid expense  debited) d) Adjustment: Expense is increased by amount prepaid is decreased; expense  debited, prepaid credited 2. Unearned Revenues a) advance receipt of future revenues and are recorded as liabilities when cash is  received b) Unearned revenues become earned revenues over time or during normal  operations c) Transaction: Advance receipt for future services, liability of unearned revenue;  cash ­> unearned revenue d) Adjustment: Unearned revenue debited for amount revenue earned; Unearned­>  earned 3. Accrued Revenues a) unrecorded revenues that have been earned and for which cash is yet to be  received b) fees for services that an attorney or doctor has provided and has not yet billed c) Transaction: Revenues been earned but not yet recorded/received ­ No entry d) Adjustment: asset receivable debited for amount earned, Revenue acct. credited 4. Accrued Expenses a) unrecorded expenses that have been incurred and for which cash has yet to be  paid b) Wages owed to employees at the end of the of a period but not yet paid is an  accrued expense c) Transaction: an expense incurred, but not yet recorded/paid ­ No entry d) Adjustment: Debit the expense and credit the liability (payable) 5. Depreciation Expense a) Fixed assets ­ long term asset but depreciates over time b) Depreciation expense ­ periodic expense comes from cost of asset depreciation c) Accumulated depreciation ­ credited in contra accounts d) Debit Depreciation Expense, Credit Accumulated Depreciation Chapter 5: I Nature of Merchandising Business 6. service business: fees earned ­ operating expenses = net income 7. Merchandising business: cost of merchandise sold = gross profit (­expenses = net  income) 8. Fees earned = revenues from services 9. Net income = fees earned ­ operating expenses 10. Sales ­ revenue from merchandise sold 11. Cost of merchandise sold ­ cost of selling merchandise recorded as an expense 12. Gross profit ­ the amount of profit made before subtracting operating expenses 13. Merchandise inventory ­ merchandise on hand (not sold) at end of accounting period V. Merchandising Transactions 1. Subsidiary ledger ­ large number of individual accounts with common characteristics 2. General ledger ­ primary ledger which contains all balance sheet & income state  accts. S. Purchases Transactions 1. perpetual inventory system ­ each purchase and sale of merchandise is recorded in  the inventory and related subsidiary ledger 2. periodic inventory system ­ does not show amount of merchandise available for sale  and sold, instead a physical inventory used to determine cost of merchandise T. Purchases Discounts 1. to encourage the buyer to pay before the end of the credit period offer discount 2. Ex. Buyer purchases 3000 worth of merchandise on account on terms (2/10, n/30) 3. This means it is a 2 % discount payable within 10 days, and no discount w/in 30 days 4. Dr. Merchandise Inventory 3000, Cr. Accounts Payable ­ (buyer name) 3000 5. Dr. Accounts Payable ­ (buyer), Cr. Cash 2940 and Merch Inv. 60 6. This is to keep track of both inventory and payment U. Purchases Returns & Allowances 1. purchases returns & allowances ­ buyer requests allowance for merchandise return  (defective, parts missing, etc.) VI. Freight V. FOB Shipping Point 1. buyer pays for the freight costs from the shipping point to final destination 2. Buyer would record the delivery transaction, seller would not 3. (e.g.) Dr. Delivery Expense, Cr. Cash W. FOB Destination 1. seller pays for the freight costs from the shipping point to the buyer’s final destination 2. Seller would record the delivery transaction, buyer would not VII.Miscellaneous X. Sales taxes 1. Seller collects sales taxes temporarily and then pays to the government 2. If a state has a 6% sales tax and buyer pays on account, for example: 3. Dr. Accounts Receivable 106, Cr. Sales 100, Sales Tax Payable 6 4. When it comes time to pay to the government 5. Dr. Sales Tax Payable, Cr. Cash Y. Adjusting for Shrinkage 1. inventory shrinkage ­ when amount of inventory on hand is less than the balance of  merchandise inventory 2. usually due to shoplifting, employee theft or error in account 3. Dr. Cost of Merchandise Sold, Cr. Merchandise Inventory


Buy Material

Are you sure you want to buy this material for

50 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Anthony Lee UC Santa Barbara

"I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.