accounting
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| IASB | international accounting standards board
-least liquid 1st into most value last. such as land to cash
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| What is an Income statment | Revenues minus expenses
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| SEC | Security Exchange Commission
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| GAAP | General Accepted Accounting Principals
- go from most liquid to least. such as cash to land
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| 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
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| Balance Sheet | Snapshot of a companies liability at any given time.
It shows the account equation answer.
Contains Assets, Liabilities, and equity
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| Assets | Anything that a company owns or controls
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| Liability | Debt to External users
Ex 1. accounts payable
Ex. 2 unearned revenue
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| 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
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| What are the -4 accounting principals | 1. Measurement (cost principal)
2. Revenue recognition
3. Expense recognition
4. Full disclosure
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| What is the Measurement Principal? (Cost Principal) | Items are recorded at Cost when you purchase them. At Actual Cost
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| 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.
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| Expense Recognition Principal (Matching Principal) | A company must record expenses incurred in order to generate revenue. (like computer equipment)
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| 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
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| What is an Income Statement? | An income statement that reports Net Income. Net Income = Revenue - Expenses
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| 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
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| 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
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| The Accounting Cycle. What is it? | 1. Analyze source documents
2. Journalize
3. General Ledger
4. Trial Balance
5. Financial Statement
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| Expanded Accounting Equation | *Assets = Liabilities + Equity + (Revenue - Expenses)
(Assets = Liabilities + Equity) = Balance Sheet
*Balance Sheet - Dividends = Retained Earnings
*Equity = shareholders
(Revenue - Expenses) = Income Statement
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| Cash Flow | 1. Operating
2. Financing
3. Investing
4. Net Cash Increase
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| The Debt Ratio | 'Total Liabilities' divided by 'Total Assets'
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| 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)
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| 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
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| Account | A record of Increases and decreases.
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| 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
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| 2 types of Transactions | Internal and External
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| Priority of Liabilities | 1) Wages (pay the employees)
2) Taxes (pay the govt.)
3) Debit/ Credit (internal buys and sells)
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| 3 Main Business Activities | 1) Financing Activities
2) Investing Activities
3) Operating Activities
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| 3 Basic Types of company operations | 1) Services (action)
2) Manufacturing (making)
3) Merchandizing (like a grocery store)
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| ROA | Return on Assets. Return on assets = 'Net income' Divided by 'Total average Assets'
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| Events | Refer to happenings that effect the accounting equation and are reliably measured
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| The two constraints | 1) Cost Benefit
2) Materiality
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| (ASSUMPTIONS) Going Concern | Accounting information reflects the presumption that business will continue
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| (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
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| (ASSUMPTIONS) Business Entity | A business is accounted for separately than other business entities, including its owner.
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| (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
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| 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.
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| How to start the accounting cycle. How to close the accounting cycle |
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| 4 accounting assumptions | 1. Going concern
2. Monetary Unit
3. Time Period
4. Business Entity
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| 2 Constraints | 1. Materiality
2. Cost benifit
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| Operating Activity | using recourses to research, develop, purchase, produce, distribute, and market products and services
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| Strategic Management | The Process of determining the right mix of operating activities for the type of organization, it's plans, and it's market
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| Cash | receipts of cash receivable, paid, checks
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| What is a source document? | Anything that proves a transaction has occurred.
Examples: receipt, client billing, note payable, purchase ticket, bank statement.
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| What happens when you debit a common stock? What happens when you credit a common stock? | Debit = decreases common stock.
Credit = Increases common stock
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| What is Common Stock?? |
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| What is DEAD CRCL? and when do you use it?? | DEAD = (debits)DebitsExpensesAssetsDividends.
CRCL = (credit)CreditRevenueCapitolLiabilities
You use this when.......(help)
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| 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)
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| 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.
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| 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.
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| 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)
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| 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
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| 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.
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| Do adjustments |
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