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ACC 203: Midterm Study Guide

by: Melissa Cirasella

ACC 203: Midterm Study Guide ACC 203

Marketplace > Pace University > Accounting > ACC 203 > ACC 203 Midterm Study Guide
Melissa Cirasella
GPA 3.74
Financial Accounting
John Paul

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About this Document

Detailed study guide for financial accounting topics
Financial Accounting
John Paul
Study Guide
50 ?




Popular in Financial Accounting

Popular in Accounting

This 4 page Study Guide was uploaded by Melissa Cirasella on Tuesday September 15, 2015. The Study Guide belongs to ACC 203 at Pace University taught by John Paul in Spring 2014. Since its upload, it has received 39 views. For similar materials see Financial Accounting in Accounting at Pace University.


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Date Created: 09/15/15
External information users 0 Not directly involved in running the organization 0 Includes shareholders investors lenders directors customers suppliers regulators lawyers brokers and the press 0 Limited access to an organization39s information Social responsibility a concern for the impact of actions on society Ethics beliefs that distinguish right from wrong accepted standards of good and bad behavior 0 Sarbanes Oxley act helps curb financial abuses at companies that issue their stock to the public more transparency accountability and truthfulness in reporting transactions 0 Guidelines for ethical decisions gt Identify ethical concerns analyze options make ethical decision Characteristics of a corporation Accounting principles 0 Measurement principle cost principle tells us that accounting information is based upon actual costs incurred historical cost 0 Revenue recognition principle provides guidance on when a company must recognize revenue 0 Matching principle expense recognition prescribes that a company must record its expenses incurred to generate the revenues 0 Full disclosure principle requires a company to report the details behind financial statements that would impact users39 decisions Accounting assumptions 0 Goingconcern principle in the absence of information to the contrary the business entity is assumed to continue operations into the foreseeable future 0 Monetary unit principle transactions can be expressed in monetary terms 0 Time period assumption the life of a company can be divided into time periods months years 0 Business entity a business is accounted for separately from its owner or other business entities sole proprietorship partnership corporation Price of land computation Steps in the accounting process 0 Analyze each transaction record relevant transactions postjournal information to ledger accounts prepare and analyze the trial balance Source documents sales tickets checks purchase orders bank statements Accounts Unearned revenues liabilities created when a customer pays in advance for products or services before the revenue is earned Prepaid expenses assets that represent payments of future expenses Ledger a collection of all accounts for a information system Debit the left side of a T account Credit the right side of a T account Double entry accounting liabilities Camlal Mel Worth 1 i T if new U90quot new mm Dem Cred m C m Accrual basis accounting revenues are recognized when earned and expenses are recognized when incurred Cash basis accounting the system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid 0 Not GAAP Adjusting entries Approach for preparing financial statements Prepaid expenses and adjusting entries Temporary accounts accumulate data related to one accounting period 0 Includes all income statement accounts the dividends account and income summary account 0 quotClosedquot at the end of the period to get ready for the next accounting period Closing entries all temporary accounts are closed but not the permanent accounts Classified balance sheet current assets long term investments plant assets intangible assets Cost of goods sold the total cost of merchandise sold during the period Cost of goods sold computation O Perpetual Inventory system gt Determine cost of goods on hand at beginning of accounting period gt Add to it the cost of goods purchased gt Subtract the cost of goods on hand at the end of the accounting period 0 Number of units soldXtheir unit costs Sales and gross profit computation 0 Gross profit Net sales cost of goods sold Inventory systems 0 Perpetual gt Detailed inventory record is maintained recording each purchase and sale durning accounting period b Up to date record is maintained on a transaction by transaction basis gt Purchase transactions are recorded directly in an inventory account gt When each sale is recorded a companion cost of goods sold entry is made decreasing inventory and recording cost of goods sold gt Information on cost of goods sold and ending inventory is available on a continuous perpetual basis 0 Periodic gt Ending inventory and cost of goods sold are determined at the end of the accounting period based on a physical count gt Cost of goods sold is calculated using CoGS equation Net purchases and ending inventory computation Quick assets cash short term investments and current receivables Goods on consignment goods shipped by the owner consignor to another party consignee Consignee sells goods for owner but owner continues to own the consigned goods and reports them in inventory Inventory valuation method 1 FIFO charges costs of the earliest units acquired to cost of goods sold leaving costs of the earliest purchases in inventory 2 LIFO charges costs of the most recent purchase to cost of goods sold leaving costs of the earliest purchases in inventory 3 Weighted average average cost per unit of inventory at the time of sale and charges this cost per unit sold to cost of goods sold leaving average cost per unit on hand in inventory Weighted average cost of goods available for saleunits available Consistency principle prescribes that a company use the same accounting methods period after period so that financial statements are comparable across periods 0 Exception when a change from one method to another will improve its financial reporting Full disclosure principle prescribes that the notes to the statements report this type of change it39s justification and effect on income Ending inventory misstatement Ending inventory understatement cost of goods sold are understated and bet income is overstated Cost of ending inventory computation LIFO perpetual inventory method computation Internal control principles 0 Establish responsibilities 0 Maintain adequate records 0 Insure assets and bond key employees 0 Separate record keeping from custody of assets 0 Divide responsibility for related transactions 0 Apply technological controls 0 Perform regular and independent reviews Voucher an authorization form prepared for each expenditure 0 Voucher system an extensive network of approvals by authorized individuals acting independently to ensure that all disbursements by check are proper gt Used to enhance the internal control over cash disbursements Petty cash small payments required in most companies for items such as postage courier fees repairs and supplies


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