Accounting Principles Flashcards

Terms Definitions
Asset Equation
Assets=Liabilities +Equity
Income Statement

(Content)
Revenues
Expenses
Gains
Losses
Asset Equation
Assets=Liabilities +Equity
Internal Transactions
Within one entity
Internal Transactions
Within one entity
GAAP
Generally Accepted Accounting Principles
Depreciation
Depre. Expense 10000 Accum Deprn-Building 10000
Equity
Owners claim on assets. Equity=Assets-LiabilitiesAlso called Net Assets or Residual Equity
3 Types of Company Operations
Services
Merchandisers
Manufacturers
Liabilities
Creditor's claims on assets. Payables.
Equity
Owners claim on assets. Equity=Assets-Liabilities
Also called Net Assets or Residual Equity
Real Accounts
Continue year after yearAssets, Liability, Equity
Accounting
information and management system to record, and communicate relevant reliable and comparable information
Financing
Provide means to pay for resources.
Accounting
information and management system to record, and communicate relevant reliable and comparable information
going-concern principle
assumption business will continue operating, not fold or sold
matching principle
expenses are recognized in the accounting period in which the service or product contributes to inflow of revenue
Financial Accounting
Focused on external users with general purpose accounting statements
Assets
Resources owned by a company and expected to yield future benefits. Web servers, land, musical instruments. Receivables.
limited partnerships (LP)
general partner(s) with unlimited liability and limited partner(s) with liability restricted to amount invested.
Expanded Accounting Equation
Assets= Liabilities + Equities(Owner, Capital - Owner, Withdrawals + Revenues - Expenses)
Principles of Accounting GAAP
Objectivity, Cost, going-concern, monetary unit, revenue recognition, business entity
limited partnerships (LP)
general partner(s) with unlimited liability and limited partner(s) with liability restricted to amount invested.
materiality
Information of such magnitude that it would influence business decisions
Assets
Resources owned by a company and expected to yield future benefits. Web servers, land, musical instruments. Receivables.
Internal Users
Run the company - Served by Managerial Accounting.
Inventory 1
beg. inv. 40000 net purch. 115000 (add up)merch avail 155000end inv <32000> (add up)cstgoodssold 123000
Account Form
Assets on the left, liabilities and equity on the right
Statement of Owner's Equity(Content)
C. Taylor, Capitol 12/1(Cap.Stocadd: investmentless:withdrawalsc. taylor capital 12/31
Report Form
Assetss on top and liabilities and equity on the bottom
Inventory 1
beg. inv. 40000
net purch. 115000 (add up)
merch avail 155000
end inv &lt;32000&gt; (add up)
cstgoodssold 123000
monetary unit principle
we express transactions in monetary units
Expenses
Decrease equity and are the cost of assets or services used to earn revenues.
Objectivity Principle
acct info is supported by independent unbiased evidence
Account Form
Assets on the left, liabilities and equity on the right
Statement of Owner's Equity

(Content)
C. Taylor, Capitol 12/1(Cap.Stoc
add: investment

less:withdrawals
c. taylor capital 12/31
Ethics
The preferred path is a course of action that avoids casting doubt on one's decisions
Balance Sheet (def)
Describes Company financial position _ type and amounts of assets, liabilities and equity at a point in time.
discount note to bank process
calc total interest-maturity valadd to principlemultiply by bank discount ratededuct bank discountremainder bank will pay 4 note
Limited Liability Partnership (LLP)
Restricts liabilites to their own acts and acts of those they control. Protects innocent partner from negligence of another. All share debt.
Expenses Vs. Assets
Rent is an expense because its benefits are used immediately, whereas a printing press is an asset because I expect to derive future benefit from it.
Statement of Cash Flows (def)
identifies cash inflows (receipts) and outflows (payments) over time
mid life loan interest adjustment
interest expense 0000 interest payable 0000
mid life loan interest adjustment
interest expense 0000
interest payable 0000
Expenses Vs. Assets
Rent is an expense because its benefits are used immediately, whereas a printing press is an asset because I expect to derive future benefit from it.
Set the GAAP in U.S.
Financial Accounting Standards Board (FASB) Private Companies

and SEC - Public Companies
Return on assets =
Net Income / Average Total Assets
Recordkeeping is essential to data reliability; but accounting is this and much more. What all does accounting include?
Accounting includes identifying, measuring, recording, reporting, and analyzing business events and transactions.
What is the relation between accounting and recordkeeping?
Recordkeeping, also called bookkeeping, is the recording of financial transactions and events, either manually or electronically. Recordkeeping is essential to data reliability; but accounting is this and much more.
business entity principle
a business is accounted for separately from business entines, including its owner
discount note to bank entries
cash 10094 notes recvbl discounted 10000 Interest revenue 94
cost principle
acct info is based on actual cost, not what i THINK it's worth
discount note to bank entries
cash 10094
notes recvbl discounted 10000
Interest revenue 94
Statement of Cash Flows (def)
identifies cash inflows (receipts) and outflows (payments) over time
Limited Liability Partnership (LLP)
Restricts liabilites to their own acts and acts of those they control. Protects innocent partner from negligence of another. All share debt.
Describe a transaction increasing equity and one decreasing it.
Earning revenue by performing services increases equity (and assets). Incurring expenses while servicing clients decreases equity (and assets). Other examples include owner investments that increase equity and withdrawals that decrease equity.
Why is the revenue recognition principle important?
The revenue recognition principle gives preparers guidelines on when to recognize (record) revenue. This is important; for example, if revenue is recognized too early, the statements report revenue sooner than it should and the business looks more profitable than it is. The reverse is also true.
Identify some advantages of technology for accounting.
Technology offers increased accuracy, speed, efficiency, and convenience in accounting.
Last receivable - now he's bankrupt
allowance for D/A 10350 acct receivable 10350
Adjusting journal Entries - 2
6 months elapses-
rent rev. rcvd in adv. 1200
rent revenue 1200
Last receivable - now he's bankrupt
allowance for D/A 10350
acct receivable 10350
Why are ethics and social responsibility valuable to organizations?
Ethics and social responsibility yield good behavior, and they often result in higher income and a better working environment.
What three-step guidelines can help people make ethical decisions?
Ethical guidelines are threefold: (1) identify ethical concerns using personal ethics, (2) analyze options considering all good and bad consequences, and (3) make ethical decisions after weighing all consequences.
Identify at least five types of managers who are internal users of accounting information.
Internal users (managers) include those from research and development, purchasing, human resources, production, distribution, marketing, and servicing.
Why are ethics crucial in accounting?
For accounting to provide useful information for decisions, it must be trusted. Trust requires ethics in accounting.
Dishonor note receivable and add $50 bank penalty
n/r disounted 10000 note rcvble 10000acct rcvble 10350 cash 10350
estimate of all probable bad accounts receivable
estimate made 12/31bad debts expense 00 allow fr doubtfl acts 00
Dishonor note receivable and add $50 bank penalty
n/r disounted 10000
note rcvble 10000

acct rcvble 10350
cash 10350
estimate of all probable bad accounts receivable
estimate made 12/31
bad debts expense 00
allow fr doubtfl acts 00
Discuss the three major sections of the statement of cash flows.
Cash flows from operating activities report cash receipts and payments from the primary business the company engages in. Cash flows from investing activities involve cash transactions from buying and selling long-term assets. Cash flows from financing activities include long-term cash borrowings and repayments to lenders and the cash investments from and withdrawals by the owner.
What is financial accounting?
And what does it provide?
The area of accounting aimed at serving external users
by providing them with general-purpose financial statements?
Describe the link between the balance sheet and the statement of owner’s equity.
The balance sheet describes a company’s financial position (assets, liabilities, and equity) at a point in time. The equity amount in the balance sheet is obtained from the statement of owner’s equity.
Why is the business entity assumption important?
Users desire information about the performance of a specific entity. If information is mixed between two or more entities, its usefulness decreases.
adjusting entry for estimate of bad debt
bad debt expense 0000
allowance for dbtfl acct 0000
When is the accounting equation in balance, and what does that mean?
The accounting equation is: Assets = Liabilities + Equity. This equation is always in balance, both before and after each transaction.
What are the three basic forms of business organization?
The three basic forms of business organization are sole proprietorships, partnerships, and corporations.
formal entry when Jones a/r debt goes bad
made on day im sureallowance for d.a 1111 Accts Rcevlb - Jones 1111
/ 77
Term:
Definition:
Definition:

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