Acct_2000-_ALL_NOTES - TEST ONE Thursday,January20,2005...

TEST ONE
Thursday, January 20, 2005
• Fields of Accounting
o Financial Accounting
 Focus is on External financial reporting
• Balance Sheet
• Income Statement
• Statement of Retained Earnings
• Statement of Cash Flows
 Creditor
• Anyone whom you owe money
 Government
• SEC (Securities and Exchange Commission)
• IRS
 Investors
o Managerial Accounting
 Focus is on Internal reporting
• Seeing what you can do to make a particular entity better.
o Taxation
 TAXES:  Income, Sales, Property,  Excise, Use, Estate
o Auditing
 CPA Firm Audits
• External - No affiliation with the company
• Internal –
• CIA Exam
o Non – Profit Accounting
 Charities
 Governments

• Financial Accounting
o Definition:  The process of identifying, gathering, and measuring
relevant economic information about a business entity to enhance the
decision making process.
o GAAP- Generally Accepted Accounting Principles
 Set of rules and procedures that we have to understand to
properly …
o Entity Concept
 The business organization should be treated separate from its
owners and other business.
o Decision Usefulness
o Book Keeping is less than Financial Accounting.
o Organizations that impact financial accounting
 FASB -- Financial Accounting Standards Board
• Issue New GAAP
 IRS – Internal Revenue Service
 SEC
 APB – Accounting Principles Board
 AICPA – American Institute of Certified Public Accountants
• Governing Body
• CPA Exam
CPE (Education)
Tuesday, January 25, 2005
• Underlying Theory
o Foundation for GAAP (Pg. 43)
 Going Concern

• The accounting entity will have an indefinite life; Operate into
the foreseeable future; The Company will be profitable over the
long run.
 Cost Principle
• Assets must be reported (Balance Sheet) at their original cost.
• Cost is objective and verifiable. (2 or more CPAs will determine
the same cost!) vs. current value (too subjective)
 Consistency
• The use of the same accounting methods from year to year.
 Full Disclosure
• “Notes” to the financial statement (Parenthetically, Notes,
Anything that might affect the user’s decision making process
needs to be disclosed)
 Materiality (Significance)
• Quantitative
o Relative Dollar Size
• Qualitative
o Relative Importance
 Conservatism
• When in doubt about how to account about something select the
accounting alternative that is least likely to overstate assets and
profits
 Monetary Unit
• The US dollar is our unit of measure in financial statements
 Stable Dollar
• Inflation is ignored!