Intro to Accounting Week 3
Intro to Accounting Week 3 MGMT 200
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This 2 page Class Notes was uploaded by Rachel Rozow on Friday September 16, 2016. The Class Notes belongs to MGMT 200 at Purdue University taught by Frank T. Kane in Fall 2016. Since its upload, it has received 5 views. For similar materials see Introductory Accounting in Business at Purdue University.
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Date Created: 09/16/16
Accounting Week 3 Objective: Explain the term “generally accepted accounting principles” GAAP and describe the role In the US, we have FASB Financial Accounting Standards Board, governed by the securities and exchange commission (SEC). Globally, we have the IASB International Accounting Standards Board The role of auditors hired by board of directors to ensure that financial reports are following the standards of the GAAP Objectives of financial accounting: Financial information Useful for decision making by investors and auditors Assists in the prediction of future cash flows Displays economic resources, claims to resources, and changes between the two The most important objective or one of them is predicting cash flows Assumptions that underline GAAP Economic entity, monetary unit, predictability, going concern The Accounting Cycle External transactions and measuring them Use source documents to identify accounts analyze impact of event on the accounting equation debit or credit record transactions post transaction to T account Account: summary of all transactions related to a particular event or item over a period of time Chart of Accounts: a list of all the account names each transaction will have a dual effect on the equation, so make sure to ask yourself: What is one account affected by the transaction? What is the second account affected by the transaction? Where do the credit and the debit apply? Transactions using the expanded equation: Provide a service, ship a product = change in revenue Promise to pay, payment = change in assets Salaries, wages, cost of materials = expenses Differed revenue is when revenue is recorded but not counted Debits and Credits Measuring external transactions> these are not like banking terms (I would suggest looking at the chart in the book) Assets Account increase on the debit side and decrease on the credit side Liabilities and Equity Accounts increase on credit and decrease on debit For liabilities, decreases are debit, increases are credit For assets, decreases are credit, increases are debit Applied to the equation: Assets(Dr) = Liabilities(Cr) + Equity(Cr) Journal: chronological listing of all transactions Journal Entry: format used for recording transactions
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