Study Guide for test 1
Study Guide for test 1 acc 203
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Popular in Accounting
This 6 page Study Guide was uploaded by Dominique Marinelli on Saturday September 26, 2015. The Study Guide belongs to acc 203 at Pace University taught by Reidenbach in Fall 2015. Since its upload, it has received 162 views. For similar materials see Financial Accounting in Accounting at Pace University.
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Date Created: 09/26/15
Study Guide Examples of accounts 0 Assets current 0 000000 0 Cash Accounts payable Notes receivable Inventories SuppHes Accrued interest revenue Prepaid rent expense Prepaid insurance expense 0 Property Plant and Equipment 0 0 Land and land improvement buildings and leasehold improvement equipment machinery construction in progress furniture computer ect Accumulated depreciation Liabilities current 0 000000000 Formulas Dividends payable Accounts payable Tax payable Notes payable Accrued interest expenses Unearned revenuesfees Current maturities of longterm liabilities Interest payable Salaries payable Rent payable Net Income Revenue Expenses profit money made money spent Assets Liabilities Stockholders Equity own owe business worth Stockholders Equity net incomeloss retained earnings Retained Earnings beginning period of RE net incomenet loss What is accounting 0 A system of maintaining records of a company s operations and communicating that information to decision makers The language of businessgt form of communication 0 Investors stock and creditors debt use this information Managerial internal users Financial external users 2 functions of Financial Accounting 1 measure business activities of a company 2 communicate those measurements to external parties Financial accounting should provide information that o Is useful to investors and creditors in making decisions 0 Helps to predict cash flows 0 Tell about economic resources claims to resources and changes in resources and claims Auditor Hired by a company as an independent party to express a professional opinion of the extent to which financial statements are prepared in compliance with GAPP and are free of material misstatement The FASB establishes financial accounting standards based on a conceptual framework which you can think of as the theory of accounting 0 conceptual framework prescribes the correctness of financial accounting rules Four Financial Statements 0 Income Statement summarizes revenues and expenses and net income or loss 0 Statement of Retained Earnings Statement of Stockholders Equity how much the company is worth to the investorsowners at a point in time 0 Balance Sheet describes all of the company s economic resources economic debts and stockholders equity at a point in time 0 Statement of Cash Flows changes in cash for a period in time o 3 categories 1 Financing 2InvesUng 3 Operating if expenses exceed revenues then the company reports a net loss Stockholder s equity has 2 primary components 0 Common stock external source Retained earnings internal source 0 Represents the cumulative amount of net income earned over the life of the company Retained Earnings profits earned by a company that have not been paid to stockholders 0 Appears on both balance sheet and stockholders equity T accounts 0 Show how much cash the account has 0 Used to make adjusting journal entries and to close an account CashBasis vs Accrual Basis Accounting Accrual 0 Record revenues when we earn them 0 Record expenses with related revenues CashBasis 0 We record revenues at the time we receive cash 0 Record expenses at the time we pay cash 0 Not accepted in preparing financial statements for most major companies Major Difference between the two is timing Use adjusting entries to record events that have occurred but that we have not yet recorded 0 Necessary part of accrualbasis accounting 0 Help record revenues in the period earned and expenses in the period they are incurred to generate those revenues Types of Adjusting Journal Entries Prepaid Expenses 0 Debit to an expense account increase an expense and a credit to a asset account decrease an asset Unearned Revenues 0 Debit to a liability account decrease a liability and credit to a revenue account increase a revenue Accrued Expenses o Accruals are the opposite of prepayments Occur when the cash flow occurs after either the expense is incurred or the revenue is earned Debit an expense account increase an expense and credit to a liability account increase a liability Accrued Revenue 0 Debit an asset account increase an asset and a credit to a revenue account increase a revenue Cash is the most liquid of all assets Closing Entries 0 Transfer balances to retained earnings account 0 Do the opposite either credit or debit
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