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by: Carlie McAmis
Carlie McAmis


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Professor Becker
Class Notes
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Popular in Accounting

Popular in Accoutning

This 4 page Class Notes was uploaded by Carlie McAmis on Wednesday September 14, 2016. The Class Notes belongs to Acct, 2010 at East Tennessee State University taught by Professor Becker in Fall 2016. Since its upload, it has received 3 views. For similar materials see Accounting in Accoutning at East Tennessee State University.


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Date Created: 09/14/16
Accounting Exam One Study Guide     1. Decision makers­ internal and external users (page 4)   ● Financial accounting: The field of accounting that focuses on providing information for  external users.   ● Managerial accounting: The field of accounting that focuses on providing for internal  decision makers.          2. Creditors­ lend money (page 5)   ● Any person or business to whom a business owes money           ​3. Accounting is a profession (page 6)   ● Certified management accountants (Or CMA’S) are certified professionals who  specialize in accounting and financial management knowledge. They typically work for a  single company.           ​4. GAAP: Generally Accepted Accounting Principles, FASB: Financial      Accounting  Standards Board, SEC: Securities & Exchange Commission (page 7)   ● GAAP: Accounting guidelines, currently formulated by the financial accounting  standards board (FASB); the main U.S. accounting rule book.   ● FASB: The private organization that oversees the creation and governance of the  accounting standards in the United States.   ● SEC: U.S. government agency that oversees the U.S. financial markets.           ​5. Characteristics of the corporation: (page 8)   ● Separate legal entity: A corporation is a business entity formed under state law. The state  grants a charter, which is the document that gives the state’s permission to form a  corporation.   ● Continuous life: Stockholders may transfer stock as they wish­ by selling or trading the  stock to another person, giving the stock away, bequeathing it in a will, or disposing of  the stock in any other way.   ● NO mutual agency: means that the stockholder cannot commit the corporation to contract  unless the stockholder is acting in a different role.   ● Limited liability of stockholders: a stockholder has limited liability for the corporation’s  debts. The most stockholders can lose is the amount they originally paid for the stock.   ● Separation of ownership and management: Stockholders own the business, but a board of  directors­ elected by the stockholders­ appoints corporate officers to manage the business.  Thus stockholders do not have to disrupt their personal affairs to manage the business.   ● Corporate Taxation: Corporations are separate taxable entities. They pay a variety of  taxes not paid by sole proprietorships or partnerships.   ● Government Regulation: To protect persons who loan money to a corporation or who  invest in its stock, states monitor the actions of corporations.            6. Forming a Corporation: (page 8 & 9)   ● Corporation: A business organized under state law that is a separate legal entity.   ● Organization of a corporation: Creation of a corporation begins when its organizers,  called the incorporators, obtain a charter from the state.             ​7.  Cost Principle Stage: (page 10)   ● Cost Principle: A principle that states that acquired assets and services should be  recorded at their actual cost.         ​ .  Economic Entity Assumption: (page 8)   ● An organization that stands apart as a separate economic unit.           ​9. Going Concern Assumption: (page 11)  ● Assumes that the entity will remain in operation for the foreseeable future.             ​10. Monetary Unit Assumption: (page 11)  ● The assumption that requires the items on the financial statements to be measured in  terms of a monetary unit.          ​11. IFRS & IASB­ International accounting standards: (page 11)   ● International Financial Reporting Standards­ A set of global accounting guidelines,  formulated by the international accounting standards board.   ● International Accounting Standards Board­ The private organization that oversees the  creation and governance of international financial reporting standards.            ​12. The Accounting Equation: (page 13 &14)   ● A=L+OE         13. Owner’s Equity: (page 13)   ● Stock­ contributed and externally generated capital.   ● Retained earning­ internally generated capital­ all company profits since the formation of  the corporation less dividends paid to shareholders.   ● Equity­ The owner’s claim to the assets of the business.             ​ 4. What is an account?: (page 68)   ● A detailed record of all increases and decreases that have occurred in an individual asset,  liability, or equity during a specific period.            ​15.  Specific Asset and Liability accounts (pages 68 & 69)   ● Assets are economic resources that are expected to benefit the business in the future.  Something the business owns or has control of that has value.   ● Liabilities is a debt that is, something the business owes. A business generally has fewer  liability accounts than asset accounts.          ​16. Prepaid Expenses and Unearned Revenue: (pages 69)  ● Prepaid Expenses­ Considered an asset because payment of an expense is made in  advance and this provides future benefit for the firm.   ● Unearned Revenue­ A liability account created because customers paid the firm before  the service was performed or goods were provided.   ● Note receivable or Note payable­ involves a written promise. (versus a verbal promise)         ​ 7. Charts of Accounts: (page 70)   ● A list of company’s accounts with their account numbers.          ​18. The Ledger: (page 71)   ● The record holding all the accounts of a business, the changes in those accounts, and their  balances.        ​ 9. The T­Account: (page 72)   ● A summary device that is shaped like a capital T with debits posted on the left side of the  vertical line and credits on the right side of the vertical line.           ​ 0. Double Entry System: (page 72)   ● Debit­ left   ● Credit­ right   ● A system of accounting in which every transaction affects at least two accounts.          ​21. Normal Balance of an Account: (page 73)   ● The balance that appears on the increase side of an account.           ​22. Source Documents: (page 75 & 76)   ● Provides the evidence and data for accounting transactions.           ​23. The Journal and Journalizing: (page 76 & 77)   ● Journal­ A record of transactions in date order.   ● After accounting review the source documents, they are then ready to record the  transactions. Transactions are first recorded in a journal, which is the record of  transactions in date order.   ● Posting­ Transferring data from the journal to the ledger.           ​24. Trial Balance: (page 91 & 92)   ● A list of all ledger accounts with their balance at a point in time.          


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