Interest Payable Notes
If rent is prepaid, then as time elapses, the asset is used up, or
consumed, and an expense is incurred.
If a business prepays $6,000 for five months' worth of rent, and if two
months have gone by, then the business has incurre
Purpose of Debt and Share Investments (LO1)
Corporations frequently purchase debt and shares of other corporations, called intercorporate
investments. Investments can be classified as strategic or non-strategic. Non-strategic
1.A partnership has unlimited life.
2.A partnership is an unincorporated association of two or more people to pursue a business for profit as coowners.
3.Mutual agency means each partner can bind or commit the partnershi
1.A cash dividend does not reduce a corporation's assets or equity, while a share dividend reduces both.
2.A company can change from one acceptable accounting principle to another as long as the change improves
the usefulness of i
1.A liability is a future payment of assets or services that a company is currently obligated to make as a result
of past transactions or events.
2.A company's obligations not expected to be paid within the longer of one year of t
1.The purpose of the statement of cash flows is to report the major items comprising cash receipts and cash
payments during a period.
2.The statement of cash flows only measures outflows of cash during a period.
1.You have just purchased some shares in a Canadian public company. Your friends call you an "investee." You
are surprised that they got it wrong: you are an investor.
2.The term "equity security" refers to the guarantee your brok
1.A bond is a written promise to pay an amount identified as the par value of the bond along with interest at a
stated annual rate.
2.Interest paid on bonds is not tax-deductible.
3.An advantage of bond financing is that
1.Property, plant and equipment are assets held for sale.
2.Non-current assets are any liabilities that are used in the operations of a business.
3.Non-current assets can be divided into two groups including tangible and
ACCOUNTING TERMINOLOGY NOTES
The Entity Assumption
The entity assumption dictates that business records must be kept
separate and distinct from the personal records of the owners.
If a person owns more than one business, then each business must
have its o
Adjustments to Accounts Notes
Adjustments to Accounts
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 i
The Balance Sheet Notes
Sections of the balance sheet:
Assets - resources of the firm that are expected to increase
or cause future cash flows (everything the firm owns)
Liabilities - obligations of the firm to outsiders or claims
against its assets by ou
Type of Ownership Notes
Transactions are recorded in accounts, which are summary
records of the changes in particular assets, liabilities, or owners
The account balance is the total of all entries to the account.
For each tran
Intro to Accounting Notes
The language of Business
Accounting - a process of identifying, recording, summarizing, and
reporting economic information to decision makers in the form of financial
Financial accounting - focuses on the specific need
Financial and Management Accounting Notes
The major distinction between financial and management
accounting is the users of the information.
Financial accounting serves external users.
Management accounting serves internal users, such as top
Expenses Definition and Example Notes
Expenses occur when resources are consumed in order to generate
They are the cost of doing business.
Examples include rent, salaries and wages, insurance,
electricity, utilities, and the like.
Basis of Accrual Accounting Notes
The Accrual Basis of Accounting
The accrual basis of accounting records revenues when goods have
been delivered or services have been performed, regardless of when
cash is received.
This basis also records expenses when r
Basic Financial Terminology Notes
Assets are valuable resources that are owned by a firm.
They represent probable future economic benefits and arise as the
result of past transactions or events.
Liabilities are present obligations of the firm.
They are pr
Balance Sheets and Income Statement Notes
Simple Balance Sheets and Income Statements
The end result of the accounting process is the preparation of
The Balance Sheet
The balance sheet shows a firm's assets, liabilities, and owner's
1.Financial statement analysis is the application of analytical tools to general-purpose financial statements and
related data for making business decisions.
2.Financial statement analysis lessens the need for expert judgment.