Acc 201 Sample exam review 1 page 2

Acc 201 Sample exam review 1 page 2 - time...

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STATEMENT OF RETAINED EARNINGS: Shows the effect of earnings or losses and dividends on the amount of earnings we have that roll over every year. BEG. RE-DIVIDENDS+NET INCOME=END. RE *Ending RE is shown on the balance sheet STATEMENT OF CASH FLOWS: Shows the cash paid out and received during the year +/-OPERATING : any cash activity involving revenue and expenses, day to day activities, paying interest on notes payable, receiving interest from notes receivable and investments +/-INVESTING: buying or selling long term assets, notes receivables, short term investments +/-FINANCING: selling (issuing) stock, signing and paying a note payable =CHANGE IN CASH Managers are responsible for the information in the financial statements. Clean (unqualified): everything’s correct Qualified: one thing isn’t correct or follows GAAP Chapter 2 4 assumptions separate entity: keep your personal transactions separate from the business’ going concern: assumes that your business will operate indefinitely
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Unformatted text preview: time period (periodicity): shorter time periods must be reported since we’re in business indefinitely unit of measure: currency you’re using Principles Relevant: financial information should be able to be used to evaluate how you’re doing as a company, create budgets and make decisions and be available for users Reliable: what’s reported in the financial statements actually happened and can be checked by outsiders and shouldn’t benefit one group (investors or creditors) over the other to mislead them Comparable: similar methods are used by your competitors or others in same industry Consistent: same methods or techniques over time Historical cost: record what you paid when the transaction took place and not any other value Constraints Materiality: you cannot have significant (large) amounts of error that what mislead users or readers Cost or Cost Benefit: the cost of putting together financial statements shouldn’t outweigh the benefit to the users...
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