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Study Guide for Chapters 1,2, and 3

by: Jada Rathbun

Study Guide for Chapters 1,2, and 3 ACC 212 - 04

Marketplace > Grand Valley State University > Accounting > ACC 212 - 04 > Study Guide for Chapters 1 2 and 3
Jada Rathbun
GPA 3.026

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About this Document

These notes are some major bullets points to know from chaters 1-3
Principles of Financial Accounting
David P Centers
Study Guide
balance sheet, Income Statments, Accounting
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This 3 page Study Guide was uploaded by Jada Rathbun on Sunday September 25, 2016. The Study Guide belongs to ACC 212 - 04 at Grand Valley State University taught by David P Centers in Fall 2016. Since its upload, it has received 40 views. For similar materials see Principles of Financial Accounting in Accounting at Grand Valley State University.


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Date Created: 09/25/16
Study Guide for Exam 1 Chapter 1  Basic accounting equation o A=L+SE  Assets o Resources that the company controls in order to create revenue and lower excess costs of economic resources o Aka something that you own like cash  Liabilities o Resources given to a company that are to be owed to creditors o Ex. Loans to the bank  Stockholder’s equity = owner’s equity o What is invested into a company o Usually stockholders  Owner’s equity o Revenue  Money that comes in that you have sold (produce, service)  Common stock o Expenses  Costs to run a business  Ex. Utilities, damages to equipment o Revenue + expenses = net income  Revenue should be greater than net income o Dividends  Money a company gives to the stockholders  Distributions of earnings o Retained earnings  Revenue increases retained earnings  Expenses + dividends decrease retained earnings  Earnings are contained in a business Chapter 2  Assets equals what was given to a company with debt (liabilities) and what was received by the stockholders (Stockholder’s Equity)  Transaction o When something that happens to the assets, liabilities, and/or stockholder’s equity has been affected financially on the company o Every transaction in a journal entry affects two accounts o 2 types of transactions  Internal  Bringing supplies together and creating something  Deprecation-as soon as the good has been sold it goes down in price o Ex. Cars  External  Buying goods and services  Equipment  Paying workers  Debit o Shown on the left side of the chart/account o Shows an increase in the assets  Credit o Shown on the right side of the chart/account o Shows an increase in liabilities and stockholder’s equity  Journal Entries o Shows transactions done within the company everyday o Places them in columns of debit and credit o Example on page 64  T-Account o Simplified version of a ledger o Shows what has happened to each account accounted for in the journal entries o Example on page 64  Trial Balance o Internal report o At the end of a journal entry or t-account the trial balance shows if the credits equal the debits o Example on page 64  Current Assets o Assets that will be used within 12 months  Current Liabilities o Debts that will be paid back within 12 months o Example entry = notes payable (short-term)  Noncurrent o Long term o Assets and liabilities that will not be paid back or used within 12 months o Stockholder’s equity is not under current or noncurrent Chapter 3  Revenues o When you sell goods/services o Temporary accounts o Stockholder’s Equity  Recorded in income statement which then is recorded in the statement of retained earnings which is stockholder’s equity  Expenses o Cost of running a business o Necessary in order to earn revenue o Stockholder’s equity  Recorded also in the income statement which is then recorded in the statement of retained earnings which is stockholder’s equity  Time period assumption o Showing the end of a smaller period of time for a company  Months, quarters, and years  Net Income o Revenue-expenses o Revenue is greater than expenses (positive outcome)  Net Loss o When you lose money because of expenses being greater than revenue earned  Cash basis accounting o Revenue is recorded when cash is given to a company o Expenses are recorded when cash is used to pay for expenses o GAAP says you need to use accrual accounting o Recognize expense when paid  Accrual basis accounting o Revenue is recorded when the cash is earned o Expenses are recorded as soon as they become an expense (even before a bill would come in) o Instantaneous o Recognize expense when incurred and revenue when it is earned o Examples  Page 105-109  Bill for utilities that will be paid next month. Utilities equal $200  May  Utilities expense 200 o Accounts payable 200  June  Accounts payable 200 o Cash 200 o 2 accounts not used in cash basis accounting are accounts payable and accounts receivable


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