Accounting Study Guide 2

Accounting Study Guide 2 - Accounting Study Guide 2-...

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A c c o u n t i n g   St u d y   G u i de   2 -   C h r ista   Pal a zz o Dividends - lower retained earnings. Not an expense. Do not affect earnings. When does the cost of equipment become an expense? Overtime- as it is used to generate revenue. Accountants use depreciation  to accomplish this  matching.  Notes Payable - not accounts payable- owed to supplier. Cash Basis: Advantages: Waiting to record expenses until they are paid and revenues when cash is received- its more  certain A user would know that if revenue was recorded cash was collected Results in fewer entries- simpler Disadvantages: Less informative- doesn’t offer “good picture” of profitability this period b/c revenues might not  be matched within the same period Does not measure financial performance (profitability) well when many transactions occur on  credit. Managers could time payments or delay payments to a future period to manipulate earnings for  this period. Channel stuffing-
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This test prep was uploaded on 04/17/2008 for the course AC 101 taught by Professor Ammons during the Spring '08 term at Quinnipiac.

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Accounting Study Guide 2 - Accounting Study Guide 2-...

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