Accounting Midterm 1 Study Guide - Accounting Midterm 1 Study Guide Chapter 1 Matching principle expenses are recorded in the same accounting period as

Accounting Midterm 1 Study Guide - Accounting Midterm 1...

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Accounting Midterm 1 Study GuideChapter 1Matching principle- expenses are recorded in the same accounting period as the related revenue regardless of when they are paidIncome statement does not = cash on handRetained Earnings= Net income – dividendsStatement of Cash FlowsoOperating: directly related to earnings and operations of the businessoInvesting: property, plant, and equipmentoFinancing: cash flow from creditors and investorsChapter 2Assets divided into current and noncurrent (historical value)oListed according to liquidityLiabilities will be fulfilled with current assetsoOrdered based on liquidity as wellCurrent ratio= Current assets/Current Liabilities5 basic steps to accounting processoIdentify which events we should recognizeoDetermine which accounts are affected by the transactionoRecord in journal entryoPost to general ledgeroPost to trial balanceChapter 3Net Profit Margin Ratio answers how effective is management in generating profiton every dollar of saleso=Net Income/Net Sales (operating revenue)Net Sales= Sales – Returns and AllowancesRevenues increase with credits, decrease with debits (+R, +SE)

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