The difference between assets and liabilities.
The difference between the cash that comes into a company and the
cash that leaves a company.
The difference between revenue and expenses.
The difference between assets and expenses.
Introduction to Accounting and Business Notes
Accounting can be defined as an information system that
provides reports to stakeholders about the economic
activities and condition of a business.
Who are stakeholders? anyone or any entity that has an
Revenues and Expenses Notes
Even though over time an asset's value may increase above
the historical cost, that cost is still kept on the books
because the number is considered to be reliable.
Revenues and Expenses
Revenues increase owners
Sarbanes Oxley Act Notes
In response to a number of publicized accounting scandals
(Enron, WorldCom, Tyco, ImClone), Congress passed the
Sarbanes-Oxley Act (also called SOX) in 2002 to help curb
financial abuses at companies that issue their stock to the
The Basic Accounting Equation Notes
Financial accounting is based upon the accounting equation.
Assets = Liabilities + Owners' Equity
This is a mathematical equation which must balance.
If assets total $300 and liabilities total $200, then
Expenses occur when resources are consumed in order to
They are the cost of doing business.
Examples include rent, salaries and wages, insurance,
electricity, utilities, and the like.
A critically important point similar t
financial statements Notes
Objective #5 - Describe the financial statements of a
proprietorship and explain how they interrelate.
Accounting reports, called financial statements, provide
summarized information to the owner.
The 4 common financial statemen
Analyzing Transactions Notes
Transaction analysis is the central component of the
financial accounting process.
Remember that every transaction must keep the accounting
equation in balance
The Entity Assumption
The entity assumption dictates that business
Adjustments to Accounts Notes
Several adjustments must be made to accounting records at
the end of the accounting period.
A balance in an account may need to be adjusted because
of the passage of time and the occurrence of events in that
Different types of Accounting Notes
Financial accounting is primarily concerned with the
recording & reporting of economic data and activities for a
business to external parties.
Managerial accounting uses both financial accounting and
estimated data to a
Common Forms of Business Entities Notes
Limited liability company
A proprietorship is owned by one individual and
Comprises 70% of business organizations in the United
Requires low cost of organizing.
Depreciation shows that an asset such as equipment or a
building is wearing out and being used up.
Depreciation expense is computed by
dividing the estimated useful life of the asset
into the asset's historical cost less any
limited liability company (LLC) Notes
A limited liability company (LLC) combines attributes of a
partnership and a corporation in that it is organized as a
corporation. However, a limited liability corporation can elect to
be taxed as a partnership and
Which of the following purchase discount terms is best for the
Which one of the following statements is about the terms of FOB
If the terms of a purchase are FOB destination, title
The assumption/principle that assumes that a company will
continue to remain in business for the foreseeable future is
The time period assumption.
The going-concern assumption.
The separate entity assumption.
Which are the fou
Debits will increase all of these accounts, except:
Credits will increase all of these accounts, except:
Audiences, Purposes, and Natures of Financial Statements
Prior to decide the audience, purpose, and natures of financial statement, it
becomes necessary the definition of the words. Financial statements are reports
that show where the money is, where it c
Define the periodic and perpetual inventory systems and discuss their
relative advantages and disadvantages.
The perpetual inventory system is a method of record keeping that
involves updating the accounting records at the time of every
Listed below are all the assets and liabilities of Cherry, Inc.:
Cash $10,000; accounts receivable $5,000; inventories $12,000;
equipment $20,000; accounts payable $25,000.
What is the total value of shareholders' equity?
10,000 + 5,000 +
From the following information, what amount would be shown as 'total
cash from operating activities' on the statement of cash flows? Cash
collected from customers, $26,000; cash paid for operating expenses,
$12,000; cash paid for interest,
Required: Prepare an income statement and a statement of retained
earnings for the period.
Required: Prepare a balance sheet as of the end of the period.
True or False
Transactions are initially recorded in the general l
According to the Generally Accepted Accounting Principles, T -Shirts
by Tommy can account for the accident is to record an extraordinary item. Using
the definition from our Intermediate Accounting textbook, extraordinary events
are defined as,
Assignment #1-Module 1
10-4B (12th Edition)
Accounts Receivable 2,932,500
(3,450,000 x 15%= 517,500)
To record sales
Cost of Goods Sold
To record cost of goods sold
account form Notes
The account form of balance sheet lists the assets on the left
and the liabilities and owners equity on the rightsimilar to
design of an account.
The report form of balance sheet presents the liabilities and
owners equity sections below