acct exam 1 review

acct exam 1 review - ACCT2001 16:34 WhatisAccounting

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ACCT 2001 16:34 What is Accounting The purpose of accounting is to: o Identify o Record o Communicate Who uses accounting Internal uses External Users Ethics Ethics are very important in accounting A few companies have been involved in financial scandals in the past Building blocks of accounting GAAP o Generally Accepted Accounting Principles SEC  o Federal government agency that oversees the accounting standard setting  and financial markets o Created in the 1930s after the stock market crash o Takes action against companies with fraudulent bookkeeping FASB o Federal Accounting Standards Board
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o Private organization primary standard setting body o Writes the GAAP rules o SEC oversees the FASB o Vote on when new rules are to be written IASB o International standard setting body o There is a convergence occurring currently between FASB and IASB Forms of Business Ownership Proprietorship o Partnership o LLP Limited Liability Partnership o Partnership agreement How the profits are shared How the workload is shared How the losses and debts are shared Retirement, addition of other partners Corporations o Ownership divided into stock o Owners invest in the business by purchasing stock
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The Basic accounting equation Assets = Liabilities + Stockholders’ Equity Assets o Cash o Supplies o Equipment o Land o Buildings o Investments o Accounts receivable Amts owed by customers o Intangible assets Trademarks Patents Copyrights o Prepaid Assets (ex. Insurance) Liabilities o Claims against assets (debts and obligations) o Creditors – party to whom money is owed. o Accounts payable, Notes payable, etc. Stockholders’ equity
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o Ownership claim on total assets o Referred to as residual equity o 2 parts are: Paid in Capital Retained Earnings (corporation) Assets – Liabilities = Stockholders’ equity 100,000 – 30,000 = 70,000 Stockholders’ Equity Increases to Stockholders’ Equity
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acct exam 1 review - ACCT2001 16:34 WhatisAccounting

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