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