Yablon Sp03 Accounting Outline

Yablon Sp03 Accounting Outline - Accounting Outline...

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Accounting Outline Professor Yablon Spring 2003 Accounting Principles Generally Accepted Accounting Principles [“GAAP”] accounting rules defined by the Financial Accounting Standards Board [“FASB”] Other Sources of Accounting Rules/Principles : SEC, American Institute of Certified Public Accountants [“AICPA”] Foundational Principles b Separate Entity Assumption – entity is distinct from owners b Going Concern Assumption – operations continue for indefinite period of time b Time Period Assumption – activities divided into discrete time periods b Matching Principle – revenue and expenses should be allocated to the period during which effort or benefit was expended or contributed to incur them, respectively. b Monetary Transactions Principle – transactions must be measurable in monetary terms. [boooo!] b Recognition Principle – revenue recognized only when exchange generating earnings has been completed or virtually completed. b Principle of Conservatism – a preference for understating earnings, values, cash flows, rather than overstating them. b Cost Principle – Assets reported at historical cost (not at higher FMV) b Materiality Principle – only material information should be reflected in financial statements. The Fundamental Equation Assets = Liabilities + Owner’s Equity (+) (-) (-) (+) (-) (+) (Debit)(Credit) (Debit)(Credit) (Debit) (Credit) Expense Accounts Revenue Accounts (+) (-) (-) (+) (Debit)(Credit) (Debit)(Credit)
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© Tal Dickstein, 2003 2 Double-Entry Bookkeeping for Real Accounts appear on balance sheet, not the income statement b Each transaction requires two entries, which always keep the fundamental equation (above) balanced. b Assets – “probable future economic benefits resulting from past, liabilities and owner’s equity.” Properties, Resources and Claims owned or controlled by the entity. o Listed in order of liquidity . b Liabilities – “probable future sacrifices of econ benefit arising from present obligations to transfer assets or render services in the future.” Debts, Accounts Payable, Services Owed, owed to others by the entity. o Listed in order of shortest due date . b Owner’s Equity/Equity/Net Worth - residual interest in assets of an entity after subtracting its liabilities from its assets. Amount of owner’s interest in the enterprise. 1. Owner contributes $10,000 cash to new Law Firm. Debit Credit Cash ( asset ) 10,000 Owner’s Equity ( owner’s equity ) 10,000 2. Firm buys stationary for $500 Debit Credit Office Supplies ( asset ) 500 Cash ( asset ) 500 3. Firm buys furniture for 3,000 on credit card Debit Credit Furniture ( asset ) 3,000 Accounts Payable ( liability ) 3,000 4. Firm pays $250 credit card bill. Debit
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Yablon Sp03 Accounting Outline - Accounting Outline...

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