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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 5.revenue 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 1. Financing 2. Investing 3. and Net cash increase
The Accounting Cycle. What is it? 1. Analyze source documents 2. Journalize 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 2. Financing 3. Investing 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 2) Journalize 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 2) Materiality
(ASSUMPTIONS) Going Concern Accounting information reflects the presumption that business will continue
(ASSUMPTIONS) 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
(ASSUMPTIONS) Business Entity A business is accounted for separately than other business entities, including its owner.
(ASSUMPTIONS) 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
Created by: 564419427
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