Review ch1-5 - C hapter 1 Securi ties and Exchange...

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Chapter 1 Securities and Exchange Commission (SEC) A federal agency with oversight powers. American Institute of Certified Public Accountants (AICPA) The national professional organization of practicing CPAs. Financial Accounting Standards Board(FASB) Private sector agency that establishes and improves reporting standards. Governmental Accounting Standards Board (GASB) Regulates state and local governmental reporting issues. Chapter 2 Assumptions - Economic entity - Going concern - Monetary unit - Periodicity Principles - Historical cost - Revenue recognition - Matching - Full disclosure Constraints - Cost-benefit - Materiality - Industry practice - Conservatism Qualitative characteristics 1. Primary qualities 1. Relevance Predictive value Feedback value Timeliness 2. Reliability Verifiability
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Representational faithfulness Neutrality 2. Secondary qualities Comparability consistency SFAC No. 8 (See the file named ‘SFAS 8 change’. Chapter 3 Real and nominal accounts (permanent and temporary accounts) Contra accounts The accounting cycle General Journal entries Adjusting journal entries Prepayments Adjusting journal entries for prepayments, required at the statement date, record the portion of the prepayments that represents the expenses incurred or the revenue earned in the current period. Prepaid expenses o Expenses paid in cash and recorded as assets before they are used or consumed. incurs a cost, debit an asset, the service/benefit will be received in the future prepaid expenses expire either with the passage of time (rent, insurance) or through the use and consumption (supplies) Insurance, supplies, rent, etc. Unearned revenues o Revenues received in cash and recorded as liabilities before they are earned. receives payments for services to be provided in the future
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credit unearned revenue (liability) an obligation exists render services earned revenue rent, magazine subscriptions, customer deposits, etc. Note: in some cases, a company records prepayments directly in expenses or revenue accounts. Prepaid Expenses If initially recorded as “ Assets ” , then AJE: Dr. Expense Cr. Assets If initially recorded as Expenses ” , then AJE: Dr. Assets Cr. Expense Unearned revenue If initially recorded as” Liabilities ”, then AJE: Dr. Liabilities Cr. Revenue If initially recorded as Revenues ”, then AJE: Dr. Revenue Cr. Liabilities Accruals Adjusting journal entries for accruals is used to record
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This note was uploaded on 05/25/2011 for the course ACCY 331 taught by Professor Madlinger,l during the Spring '08 term at Northern Illinois University.

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Review ch1-5 - C hapter 1 Securi ties and Exchange...

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