ACCOUNTING 230 SPRING 2011 FINAL SUBJECT OUTLINE Know each subject listed in detail

ACCOUNTING 230 SPRING 2011 FINAL SUBJECT OUTLINE Know each subject listed in detail

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ACCOUNTING 230 SPRING 2011 FINAL SUBJECT OUTLINE Know each subject listed in detail (go to your book and review each one and the journal entries related to each subject!) FINANCIAL ACCOUNTING ELEMENTS The 4 Basic Financial Statements The Income Statement reports success or failure of operations for period of time. Revenues and expenses to get net income The Retained Earnings Statement net income retained in corporation. Causes of changes in retained earnings. The Balance Sheet Liquidity Solvency assets and claims to assets at specific point in time. Assets must balance with claims (liabilities and stockholders equity). Profitability Profitability is the primary goal of all business ventures to make money Internal/External Users of Financial Information Internal Users o Managers who plan organize and run a business External users o Investors who use accounting info to make decisions to buy, hold , or sell stock Assumptions and Principles of Financial Accounting 3 forms of a business organization + characteristics of each Sole Proprietorship o Owner controlled o Simple to establish o Tax advantages Partnership o Simple to establish o Shared control o Broader skills and resources o Tax advantages Corporation o Easy to transfer ownership o Easier to raise funds o No personal liability 3 business activities : CASH FLOW STATEMENT Operating Sales, service and interest revenue All expenses Assets with shorter lives (Inventory and supplies) Financing It takes money to make money Financing activities are bonds issued by banks and common stock sold for cash Bonds Payable Gaining money Investing Purchase of resources that the company needs to operate
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Investing in securities (stocks or bonds) is another investing activity Putting Money to work Time Period Assumption The life a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business Going Concern Assumption States that the business will remain in operation for the foreseeable future Cost Principle Dictates that assets be recorded at their cost If the value of land increases, cost will be reported at original cost Materiality Relates to a financial statement item’s impact on a company’s overall financial condition and operation An item is material when its size make it likely to influence the decision of an investor or creditor Conservatism When choosing an accounting method it should be the least likely to overstate assets or income Qualitative characteristics of Accounting: Relevance o Would it make a difference in a business decision o Is it useful for making predictions Reliability o Can the information be depended on o Info must be verifiable, neutral and a faithful representation Comparability o Each company must use set accounting standards o Disclose what methods used Classified Balance Sheet: Current Assets are cash and other resources that are reasonably expected to be realized in cash or sold or consumed
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This note was uploaded on 01/30/2012 for the course ACCTG 230 taught by Professor Pearson during the Spring '07 term at Washington State University .

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ACCOUNTING 230 SPRING 2011 FINAL SUBJECT OUTLINE Know each subject listed in detail

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