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accounting
| 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 |
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