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Final Prep - Dec 9

Final Prep - Dec 9 - AFM 101 Final Review Session Chapter 1...

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AFM 101 Final Review Session
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Chapter 1 n Four Financial Statements n IFRS n Governance, Management
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Chapter 2 n Objective of Financial Reporting n Assumptions Separate-Entity Assumption Unit-of-Measure Assumption Continuity Assumption Cost Principle
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Chapter 2 n Definitions of assets, liabilities (current and non-current), shareholders’ equity n Understanding transactions, accounts, t- accounts, double entry accounting n Statement of Financial Position
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Chapter 3 n Operating (Cash-to-Cash Cycle) n Periodicity Assumption n Income Statement Revenues Expenses Gains/Losses n Cash vs Accrual Basis
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Chapter 3 n Revenue Principle n Matching Process
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Chapter 4 n Adjusting Entries Accrued/Deferred Revenues/Expenses Contra Accounts n Materiality Closing Entries
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Chapter 5 – Cash Flow Statement n Classification Operating Investing Financing n How individual transactions affect cash n Direct vs Indirect Method of Reporting n Analysis of Cash Flows
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Chapter 5 – Statement of Financial Position n Increases to Non-cash Current Assets -> Subtract Operating Cash n Increases to Current Liabilities -> Add Operating Cash n Long-term Assets: May have investing cash inflows or outflows n Long-term Debt and Share Capital: May have financing cash inflows or outflows n Dividends
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Chapter 5 – Income Statement n Amortization/Depreciation n Gain/Loss on Sale: Operating Cash Flow Gain on Sale = Selling Price – Net Book Value n Net Income as basis for Operating Cash
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Chapter 6 n Regulating Bodies of the Accounting World n Auditors and the purpose of Auditing n Users n Disclosure
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Guiding Principles for Communicating Useful Information n Relevance n Material n Faithful Representation n Comparability n Verifiability n Timeliness n Understandability n Cost-Effectiveness
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Chp 7: Sales, Receivables, and Cash n Sales When to record revenue Sales Discounts Sales Returns and Allowances n Accounts Receivable Estimating Bad Debt Expense Receivables Method Sales Method Writing off Accounts Collecting an amount from a written off account
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Chp 7: Sales, Receivables, and Cash n Cash Bank Reconciliation Company Books Bank Statement End Balance End Balance + Additions (ie: automatic deposits) + Additions (ie: Deposits in Transit) - Deductions (ie: automatic withdrawals, Bank Charges) - Deductions (ie: Outstanding Cheques) +/- Error +/- Error Adj Ending Balance Adj Ending Balance
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Trade Receivables – AFDA Question n Dec 31, 2010 Trade Receivables = 200,000DR AFDA = 10,000 CR n During 2011 5,000,000 sales, 60% on credit Collected 2,500,000 of receivables $40,000 determined to be uncollectible n Company uses trade receivables method 3% deemed to be uncollectible
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Trade Receivables Beg Balance 200,000 Sales (5,000,000 x 60%) 3,000,000 Collected (2,500,000) Written-off (40,000) End Balance 660,000 3% 19,800
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Aging (Receivables) Method DR Bad Debt Expense 49,800 CR Allowance for Doubtful Accounts 49,800 Allowance for Doubtful Accounts Beg Balance 10,000 Write Off (40,000) Bad Debt Expense xxx End Balance 19,800
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%age of Sales Method
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