|IASB ||international accounting standards board
-least liquid 1st into most value last. such as land to cash|
|What is an Income statment ||Revenues minus expenses|
|SEC ||Security Exchange Commission |
|GAAP ||General Accepted Accounting Principals
- go from most liquid to least. such as cash to land|
|What are the 4 Financial Statements ||1. Source Documents (you journalize that) then you TRIAL BALANCE it then INCOME STATEMENT
2. Income Statement
3. Statement of Retained Earnings
4. Statement of Cash Flow|
|Balance Sheet ||Snapshot of a companies liability at any given time.
It shows the account equation answer.
Contains Assets, Liabilities, and equity|
|Assets ||Anything that a company owns or controls|
|Liability ||Debt to External users
Ex 1. accounts payable
Ex. 2 unearned revenue|
|Equity ||Equity= assets minus liabilities
ex 1. its contributed capital
ex 2. common stock
ex 3. dividends
ex 4.retained earnings
ex 6. expenses|
|What are the
-4 accounting principals ||1. Measurement (cost principal)
2. Revenue recognition
3. Expense recognition
4. Full disclosure|
|What is the Measurement Principal? (Cost Principal) ||Items are recorded at Cost when you purchase them. At Actual Cost|
|What is the Full Disclosure principal? ||When a company is obligated to provide all information that would impact a common persons view of a company.|
|Expense Recognition Principal (Matching Principal) ||A company must record expenses incurred in order to generate revenue. (like computer equipment)|
|Revenue Recognition Principal ||1. Provides guidance when a company must recognize revenue.
2. It can only do so when a service or sale is complete.
3. If a company records revenue too early it will look more profitable than it is and visa- versa |
|What is an Income Statement? ||An income statement that reports Net Income. Net Income = Revenue - Expenses|
|What is the purpose of a statement of retained earnings? What does it show? ||Statement of Retained earnings shows a companies retained earnings minus the dividends.
previous months retained earnings + Net Income - Dividends = Current retained Earnings|
|What is a cash flow statement? What does it include? ||The Statement of cash flow identifies the outflow of cash and the inflow over a period of time.
Shows operating activities
3. and Net cash increase |
|The Accounting Cycle. What is it? ||1. Analyze source documents
3. General Ledger
4. Trial Balance
5. Financial Statement|
|Expanded Accounting Equation ||*Assets = Liabilities + Equity + (Revenue - Expenses)
(Assets = Liabilities + Equity) = Balance Sheet
*Balance Sheet - Dividends = Retained Earnings
*Equity = shareholders
(Revenue - Expenses) = Income Statement|
|Cash Flow ||1. Operating
4. Net Cash Increase|
|The Debt Ratio ||'Total Liabilities' divided by 'Total Assets'|
|T - Accounts ||A 'T - account' represents a ledger account and is a tool used to understand the effects of one or more transactions.
Debits are left (Increase assets).
Credits are right (decrease assets) |
|The General Ledger (and the chart of accounts) ||A record containing all the accounts used by a company
(chart of accounts is a list of all accounts)
101-199 - Asset accounts
201-299 - Liability accounts
301-399 - Equity accounts
401-499 - Revenue accounts
501-699 - Expense accounts|
|Account ||A record of Increases and decreases.|
|What are the 4 steps in the Analyzing & Recording Process ||1) Source Document
3) Trial Balance
4) Post Journal Information in Ledger accounts |
|2 types of Transactions ||Internal and External |
|Priority of Liabilities ||1) Wages (pay the employees)
2) Taxes (pay the govt.)
3) Debit/ Credit (internal buys and sells)|
|3 Main Business Activities ||1) Financing Activities
2) Investing Activities
3) Operating Activities|
|3 Basic Types of company operations ||1) Services (action)
2) Manufacturing (making)
3) Merchandizing (like a grocery store)|
|ROA ||Return on Assets. Return on assets = 'Net income' Divided by 'Total average Assets'|
|Events ||Refer to happenings that effect the accounting equation and are reliably measured|
|The two constraints ||1) Cost Benefit
Going Concern ||Accounting information reflects the presumption that business will continue|
Monetary Unit ||We can express transactions in monetary, or money units.
Like dollars associated with dollars or dollars with couches or what ever has monetary value|
Business Entity ||A business is accounted for separately than other business entities, including its owner. |
Time Period ||Presumes that the life of a company can be divided up into time periods, such as days and months. Useful reports can be prepared for those periods|
|Plant Assets ||Often referred to as fixed assets. This would include long term assets such as buildings and equipment used by a company. Plant assets (other than land) will be depreciated over their useful lives.|
|How to start the accounting cycle. How to close the accounting cycle |
|4 accounting assumptions ||1. Going concern
2. Monetary Unit
3. Time Period
4. Business Entity|
|2 Constraints ||1. Materiality
2. Cost benifit|
|Operating Activity ||using recourses to research, develop, purchase, produce, distribute, and market products and services|
|Strategic Management ||The Process of determining the right mix of operating activities for the type of organization, it's plans, and it's market|
|Cash ||receipts of cash receivable, paid, checks |
|What is a source document? ||Anything that proves a transaction has occurred.
Examples: receipt, client billing, note payable, purchase ticket, bank statement. |
|What happens when you debit a common stock? What happens when you credit a common stock? ||Debit = decreases common stock.
Credit = Increases common stock|
|What is Common Stock?? |
|What is DEAD CRCL? and when do you use it?? ||DEAD = (debits)DebitsExpensesAssetsDividends.
CRCL = (credit)CreditRevenueCapitolLiabilities
You use this when.......(help)|
|What is the current ratio?? How do you find the Current Ratio?? ||The current ratio is one measure of a companies ability to pay it's short term obligations.
The current ratio = current assets divided by current liabilities.
(if the ratio is less than 1, than current liabilities exceed current assets)|
|Profit Margin ||Profit margin = net income divided by net sales.
Profit margin is used to tell you the percent of profit of each dollar sale.|
|Operating Cycle ||is the span of time between cash being used to acquire raw material, and the sale of what ever you're making from said material.|
|Managerial accounting vs. Financial Accounting ||Managerial accounting is for Internal users. Financial Accounting is for external users. (external users like SEC to check up on your company for investors)|
|Accrual accounting vs. Cash accounting ||Accrual accounting (think banker): you note down every financial action. Cash accounting (think drug dealer): when you pay cash for things. cash in hand|
|What is an Interim Financial Statement ||It's a statement which can happen either 1, 3, or 6 months. It's a snapshot of the current state of the company. |
|Do adjustments |