accounting study guide

accounting study guide - Chapter 1 Study Guide Basic forms...

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Chapter 1 Study Guide Basic forms of business organization structures: Sole proprietorship: One owner Partnership: minimum of two or more owners Corporation: many owners with little liability Basic types of businesses: Merchandising: companies buy and sell products Service: a company provides a service Manufacturing: companies produce products and then sell them. Elements of accounting: Assets: rights to use resources that have expected future economic benefits. Liability: the obligation to transfer economic resources to suppliers at some point in the future Owners’ equity: any remaining assets belong to the owners after all of the liabilities are met. Revenue: the amount earned from providing services or transferring resources to cus- tomers. Expense: the amount incurred from using resources or services in the effort to gener- ate revenue. The accounting equation: Assets= Liabilities + Owners’ Equity Assets - Liabilities = Owners’ Equity Accrual Basis of Accounting: income is the difference between the sales (revenue) earned and expenses incurred during the period, regardless of when cash is paid or re- ceived. Revenues: amounts earned from providing goods and services. Expenses: amounts incurred in an attempt to generate revenue. Revenues - Expenses = Net Income (Loss) <-- losses in parentheses. Statements of financial accounting concepts: 1. Objectives of financial reporting by business enterprises 2. Qualitative characteristics of Accounting information 3. Superceded by No. 6 4. Objectives of financial reporting by nonbusiness organizations. 5. Recognition and measurement in financial statements of business enterprises 6. Elements of financial statements 7. Using cash flow information and present value in accounting measurements
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Concept Statement No. 1 Should provide info that is useful for making investment, credit, etc. Should help as- sess the amounts, timing, and uncertainty of cash flows: and that indicates the com- pany’s economic resources and claims to those resources. Accomplished by providing external users with a set of financial info known collectively as financial statements. Concept Statement No. 2 Discusses characteristics accounting information should possess. The benefits re- ceived from accounting information must exceed the cost of providing the info. Must be understandable and useful for decision making. Should be relevant and reliable. Concept Statement No. 4 Discusses the objectives of reporting by nonbusiness organizations. Ex: United Way, Religious organizations, not-for-profit fall into this category. Objectives of non-business organizations are similar to those of business enterprises- to provide useful information to external decision makers. Concept Statement No. 5
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accounting study guide - Chapter 1 Study Guide Basic forms...

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