Mid-Term - Taylor Chestnut ACC 151 3/5/08 ACC 151 Mid-Term...

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Taylor Chestnut ACC 151 3/5/08 ACC 151 Mid-Term Chapter 1 Accounting is the language of business, they communicate the activities of the business to the public through financial statements Accountant comes in after bookkeeper and communicates, interprets, and advises the business. You can become a CPA, Certified Public Accountant Financial Accounting deals with the communication of information to external users, deal with the preparations of financial statements. Management Accounting is the area of accounting that provides information for decision making activities within the business (Internal Users). o External Users Stockholders, lenders, government agencies, consumer groups, external auditors, customers o Internal Users Managers, sales staff, officers, directors, budget officers .GAAP (Generally Accepted Accounting Principles) o Serves 3 purposes – Relevant, Reliable, and Comparable o Decided on by FASB (Financial Accounting Standards Board) o There are 6 principles that all GAAP rules are based off of: Objectivity – Everything on a financial statement needs to have evidence to support it Cost Principle – Financial statements are based on the cost when they were purchased, not the current value Going-Concern Principle – You assume the company will survive Monetary Unit Principle – Always use common currency ($) Business Entity Principle – Keep personal expenses separate from that of the business Revenue Recognition Principle –Only recognize revenue when the earning process is complete or there is reassurance of collection. Problems: E 1-13 Real Answers Income Statement For the period ending October, 31 Revenue Consulting Fees Earned $14,000 Expenses Rent Expense $3,550 Salaries Expense 7,000 Telephone Expense 760 Miscellaneous Expense 580 Total Expense $11,890
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Net Income $2,110 E 1-14 Real Answers Statement of Retained Earnings For the Period ending October, 31 Retained Earnings from October 1 $0 Plus: Net Income 2,110 2,110 Less: Dividends 2,000 Retained Earnings, October 31 $110 E 1-15 Real Answers Balance Sheet October, 31 Assets Liabilities Cash $11,360 Accounts Payable $8,500 Accounts Receivable 14,000 Office Supplies 3,250 Equity Office Equipment 18,000 Common Stock $84,000 Land 46,000 Retained Earnings 110 Total Assets $92,610 Total L + E $92,610 E 2-10 OnTech Income Statement For the period ended October, 31 Revenue Consulting Fees earned $14,000 Expenses Rent Expense 3,550 Salaries Expense 7,000 Telephone Expense 760 Miscellaneous Expense 580 Total Expense $11,890 Net Income $2,110 E 2-11 OnTech Statement of Retained Earnings For the period ended October, 31 Retained Earnings as of October 1 $0 Plus: Net Income 2,110
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Less: Dividends 2,000 Retained Earnings as of October 31 $110 E 2-12 OnTech Balance Sheet October 31 Assets Liabilities Cash $11,360 Accounts Payable $8,500 Accounts Receivable 14,000 Office Supplies 3,250 Equity Office Equipment 18,000 Common Stock
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Mid-Term - Taylor Chestnut ACC 151 3/5/08 ACC 151 Mid-Term...

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