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ACCT Exam 1 Chapters 1&2 Study Guide

by: Erica Reynolds

ACCT Exam 1 Chapters 1&2 Study Guide ACCT 2010

Marketplace > East Tennessee State University > Accounting > ACCT 2010 > ACCT Exam 1 Chapters 1 2 Study Guide
Erica Reynolds

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About this Document

This study guide covers everything from chapters 1 and 2 that will be on exam 1.
Principles of Accounting 1
Ashley Bentley
Study Guide
Intro to Accounting, basic accounting equation, financial statements
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This 7 page Study Guide was uploaded by Erica Reynolds on Saturday September 3, 2016. The Study Guide belongs to ACCT 2010 at East Tennessee State University taught by Ashley Bentley in Fall 2016. Since its upload, it has received 7 views. For similar materials see Principles of Accounting 1 in Accounting at East Tennessee State University.

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Date Created: 09/03/16
ACCT-2010-003 Exam 1 Study Guide Chapters 1 and 2 Chapter 1 Accounting is an information system that measures the success of a business and produces financial statements (measures activities, process information into reports, and communicates the results to decision makers) Types of Accounting 1. Financial Accounting; provides information for external decision makers a. Investors, competitors, customers, state tax authority, banks/creditors, etc. 2. Managerial Accounting; provides information for internal decision makers a. Business owner(s), executives, employees, etc. Business Organizations 1. Sole Proprietorship a. Business with single owner 2. Partnership a. Business with two or more owners and not organized as a corporation 3. Corporation a. Business organized under state law that is a separate legal entity 4. Limited-Liability Company (LLC) a. Company in which each member is only liable for his or her own actions (GAAP) Generally Accepted Accounting Principles; common set of standards and procedures for preparing financial statements; the main U.S. accounting rule book. Governing Organizations  (SEC) Securities and Exchange Commission o Oversees the U.S. financial markets; enforce adherence to accounting standards  (FASB) Financial Accounting Standards Board o Oversees the creation and governance of accounting standards in the U.S.  (AICPA) American Institute of Certified Public Accountants o Created GAAP GAAP  Economic Entity Assumption o Shareholders keep their personal business records separate from the records of the corporation  The Cost Principle o Assets are recorded at their historic price (originally paid) rather than the current value  The Going Concern Assumption o Users can assume that the business will continue to operate  The Monetary Unit Assumption o Financial statements reflect money as the unit of measure  Faithful Representation o Financial statements include all information that might influence decision makers The Accounting Equation Assets = Liabilities + Equity The Stockholders’ Equity Equation Beginning Equity + Common Stock + Net Income or – Net Loss – Dividends = Ending Equity Assets; economic resources that benefit the company; what a business owns of controls (has monetary value)  Equipment, Land, Buildings, Supplies, Inventory, Cash, Accounts Receivable, Prepaid Expenses, etc. Liabilities; any debt a business owes  Notes Payable(loans), Accounts Payable(expenses owed), Unearned Revenue, etc. Equity; net worth  Contributed Capital(common stock), Retained Earnings o Things That Impact Retained Earnings  Revenue; causes equity to increase  Expenses; causes equity to decrease  Dividends; causes equity to decrease Analyzing Transactions Steps 1. Determine which two (or more) accounts are impacted by the transaction and the account types. 2. Decide if the account is increasing or decreasing. 3. Make sure the accounting equation is balanced. Account Types; 1. Assets 2. Liabilities 3. Equity 4. Revenue 5. Expenses 6. Dividends Financial Statement Types 1. Income Statement a. Summarizes revenues and expenses b. Reports net income or net loss c. Determines if a business is profitable 2. Statement of Retained Earnings a. Reports changes in retained earnings during a period of time from the beginning to the end b. Shows how a business uses its retained earnings 3. Balance Sheet a. Reports on assets, liabilities, and equity of a business on a specific date (snapshot) b. Shows the amount of assets a business has and who can claim them c. Allows a quick assessment of the overall health of the business Accounts that show up on each statement  Income Statement o Revenue and Expenses  Statement of Retained Earnings o Dividends and Retained Earnings  Balance Sheet o Assets, Liabilities, and Equity (Retained Earnings) Chapter 2 General Journal; record of transactions in date order. Normal Balance of Accounts  Debit (to increase) o Assets, Expenses, Dividends  Credit (to increase) o Liabilities, Revenue, Equity Ledger; record of all accounts, the changes in those accounts, and their balances  T-Account; summary device with debits posted on the left and credits posted on the right of the vertical line (shows how much money is in each account) Trial Balance; list of all ledger accounts with their balances on a specific date (snapshot) Summary of the Accounting Process; Journalize transactions, post to the accounts, prepare a trial balance Terms and Tips Audit; examination of a company’s financial statements and records Net Income; occurs when total revenues are greater than total expenses Net Loss; occurs when total expenses are greater than total revenues Transaction; any event that affects the financial position of a business and can be measured reliably in dollar amounts Account; detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specific period Chart of Accounts; list of all of a company’s accounts with their account numbers Double-Entry System; every transaction affects at least two accounts Posting; transferring data from the journal to the ledger Compound Journal Entry; multiple debits and/or multiple credits Words to look for;  Cash (asset)  Payable (liability)  Receivable (asset)  Paid (cash decrease)  Issues stock (cash increase and stock increase) ALWAYS list debits first; indent when listing credits. Debits and credits must be equal. Create statements in order; income statement, statement of retained earnings, balance sheet If you debit something to increase it, you must credit it to decrease and vice versa. u‚‚›A.@ZˆŒ Z\  u J ‚µ)-u-1˜I‚µ-va–mr=i‰HŒ-I‰”li--,i.g-’†‰„@--i--‚µ[E@@@@@-@@@@@E¡@---–Ó. ŠQŽl‘•ÞŠÖŠí‚˝•Þ (’‚ˆˆ‰°ˆˆˆ”˝uŒ˘‰‚aŒö ‘„ª·—`—p,“€“恈 ‚‰•G‚µ”' ‡K‡_e—Ձˆˆ•Œ‚à‚µ ‚Ž†H. ‰Øbdœ@@@‹Œ“I –L•x’n—‹@“æ‹'‚à “Iƒ—Z‘D’‹‹¨ ’à•ª˜D“⁄@@@_:‘´’U ’n‹žˆŠ˚‚–‚ uŒ—Zfl‚Žm‚µ‚–ˆ“ì’`Žq“Ø‹O“_ ƒR—¨uül Œu„—A ‰ Þ  @  öŸ ~ ’ R _ s/lÝ _$S›› —˙¢F•¿u‹h $ s o o q‰æ‚µ‰°.Aå‰a‚nF—$“fiZ C—‚àh AŒ¿Zc‚ß Žž‰fl‚µ‹ Žv—¿ S — L  Ý  @  ç• i ’Þ‚Ø/COO C‹wSh ‘˜‚⁄/‡\‹‰ ` -‰€“c A Ž Æ 1 AŽÒ ˆ Ž–A@I‚µŠ‹‚Ö ‹'”Ý‘ƒ‚à‚ŽÔŒ—h;—„ª ‚–:•}‰G R¤-ZˆŒˆŒ/


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