ACT Review Sheet Ch.2 - someone else i Ex McDonald’s b...

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Review Sheet for Chapter 2 1) Building a Balance Sheet a. Company would need to aquire assets. When they aquire assets needed they would have to be equal to the Liabilities (what the company owes). Because of the people starting up the company they would have a claim on the companies assets (Stockholders Equity). b. A=L+SE 2) Three features of how accounting works a. The company always documents activities. (Any business activity) b. The company always receives and gives something. c. Each exchange is analyzed to determine a dollar amount that represents the value of items given and received. 3) Transactions and other Activities a. External exchanges- Exchanges that involve assets, liabilities, and or stockholders equity that you can see between the company and
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Unformatted text preview: someone else. i. Ex: McDonald’s b. Internal Exchanges- These events do not involve exchanges with others outside business, but rather occur within the company itself. i. Ex: Subway 4) Studying the Accounting Methods a. Analyze Transactions- Often referred to as transaction analysis, looked at how the business activities effect the basic accounting equation. i. Duality of Effects- Every transaction has at least two effects on the basic accounting equation. ii. A=L+SE (Basic equation for accounting ) everything must be equal in this equation always. 1. Chart of Accounts- list that designates a name and reference number that the company will use when accounting for each item it exchanges. 2....
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