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Accounting Final Flashcards

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1
Q

Users of accounting

A

External And Internal Users

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2
Q

Accounting Assumptions

A

1) Going-Concern Assumption
2) Monetary Unit Assumption
3) Time Period Assumption
4) Business Entity Assumption

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3
Q

Going-Concern Assumption

A

That accounting information reflects a presumption that the business will continue operating instead of being closed to sold. This implies, for example, that property is reported at cost instead of, say, liquidation values that assume closures

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4
Q

Monetary Unit Assumption

A

Means that we can express transactions and events in monetary, or money, units.

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5
Q

Time Period Assumption

A

Presumes that the life a company can be divided into tome periods, such as months and years, and that useful reports can be prepared for those periods

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6
Q

Business Entity Assumption

A

Means that a business is accounted for separately from other business entities, including its owner

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7
Q

Accounting Principles

A

1) Measurement Principle (Cost Principle)
2) Revenue Recognition Principle
3) Expense Recognition Principle (Matching Principle)
4) Full Disclosure Principle

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8
Q

Measure Principle (Cost Principle)

A

Accounting principle that prescribes financial statements information to be based on actual costs incurred in business transactions

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9
Q

Revenue Recognition Principle

A

The Principle prescribing that revenue is recognized when earned as a result of the expenses

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10
Q

Expense Recognition Principle (Matching Principle)

A

Prescribes expenses to be reported in the same period as the

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11
Q

Full Disclosure Principle

A

Principle that prescribes financial statements (including notes) to report all relevant information about an enmity’s operations and financial condition

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12
Q

Accounting Equation

A

Assets = Liability + Owners Equity

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13
Q

Assets

A

Resources a business owns or controls that are expected to provide current and future benefits to the business

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14
Q

Liability

A

Creditors claim on an organization assets; involves a probable future payment of assets, products, or services that a company is obligated to make due to past transactions or events.

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15
Q

Owners Equity

A

Owners claim on the assets of a business; equals the residual interest in an entity’s assets after deducting liabilities; also called net assets

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16
Q

GAAP

A

Generally Accepted Accounting Principles: Rules that specify acceptable accounting principle

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17
Q

Financial Statements

A

1) Income Statement
2) Statement Of Owners Equity
3) Balance Sheet

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18
Q

Income Statement

A

Describes a company’s revenue and expenses along with the resulting net income or loss over a period of time due to earning activities.

All Revenue - All Expenses = Net Income

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19
Q

Statement Of Owners Equity

A

Explains changes in equity from net income (or loss) and from any owner investment and withdrawals over a period of time.

Beg. Capital + Investments by owner + Net Income - Withdrawal by owner = C. Taylor, Capital, Date

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20
Q

Balance Sheet

A

Describes a company’s financial position (types and amounts of assets, liabilities, and equity) at a point in time.

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21
Q

Ledger

A

Record containing all accounts ( with amounts) for a business; also called general ledger

A record of all the account used by a company
Ledger is second

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22
Q

Journal

A

Record in which transactions are entered before they are posted to ledger accounts; also called book of original entry.

Where the transaction is listed
Gives a complete record of each transaction in one place. It shows debits and credits for each transaction.
This is the first thing you do

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23
Q

Posting

A

Process of transferring journal entry information to the ledger is called posting
Taking it to the journal to the ledger

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24
Q

Adjusting Entries

A

Journal entry at the end of an accounting period to bring an asset or liability account to its proper amount and update the related expenses or revenuer account

Adjustments are necessary for transactions and events that extend over more than one period. It is helpful to group adjustments by the timing of cash receipts or cash payments in relation to the recognition of the related revenues or expenses.

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25
Permeant (real) Account
Accounts that reflect activites related to one or more future periods; balance sheet accounts whose balances are not closed; also called real accounts Report on activities related to one or more future accounting periods
26
Temporary (nominal) Account
Accounts used to record revenues, expenses, and withdrawals (divided for a corporation); they are closed at the end of each period; also called normal accounts Accumulate data related to one accounting period.They included all income statement accounts, the withdrawal accounts and the income summary account.
27
Income Summary
Just used in closing statement Temporary account used only in the closing process to which the balances of revenue and expenses accounts ( including any gain or loses) are transferred; its balance is transferred to the capital account (or retained earning for a cooperation) That contains a credit for the sum of all revenues ( and gains) and a debit for the sum of all expenses (and loses)
28
Trial Balance
List of accounts and their balance at a point in time; total debit balances total credit balance Unadjusted Trial Balance Adjusted Trial Balance Post Closing Trial Balance
29
Unadjusted Trial Balance
List of accounts and balances prepared before accounting adjustments are recorded and posted. (p.106
30
Adjusted Trail Balance
ASK KEN
31
Post Closing Trial Balance
List of permanent accounts and their balances from the ledger after all closing entries are journalized and posted (p.146) It list the balances for all accounts not closed
32
Merchandiser
They buy and sell goods. They do NOT manufacture them Entity that earns net income by buying and selling merchandise Identified as either wholesaler or retailers
33
Credit Terms
Description of the amounts and timing of payments that a buyer (debtor) agrees to make in the future. 2/15 n60
34
2/15 n60
- 2% Discount - 15 Days to get discount - n60 net 60 if you don't pay within the discount it will all be due in 60 days Debit Merchandise Inv. when you pay for shipping
35
Net Sales Equation
$1,000,000 Gross sales - $10,000 Sales returns - $5,000 Sales Allowances - $15,000 Discounts = $970,000 Net sales
36
COGS ( Cost of Goods Sold)
Cost of inventory sold to customers during a period; also called cost of sales Beginning Inventory + Inventory Purchases – End Inventory = Cost of Goods Sold
37
External Users
- Lenders - Shareholders - Governments - Consumer Groups - External Auditors - Customers
38
Internal Users
- Officer - Mangers - Internal Auditors - Sales Staff - Budget Officers - Controllers
39
FASB
Financial Accounting Standards Board: Independent group of full-time members responsible for setting accounting rules
40
Debits
Recorded on the left side; an entity that increases assets and expenses accounts, and decreases liability, revenue, and most equity accounts Left side is the normal balance for assets
41
Credits
Recorded on the right side; an entry that decreases asset and expense accounts, and increase liability, revenue, and most equity accounts Right side is the normal balance for liabilities and equity
42
Accrual Basis Accounting
Accounting system that a recognizes revenues when earned and expenses when incurred; the basis for GAAP
43
Cash Basis Accounting
Accounting system that recognizes revenues when cash is received and records expenses when cash is paid. p95
44
Prepaid Expenses
Items paid for in advance of receiving their benefits; classified as assets 97
45
Unearned Revenue
Liability created when customers pay in advance for products or services; earned when the products or services are later delivered p.100
46
Accrued Expenses
Cost incurred in a period that are both unpaid and unrecorded; adjusting entries for recording accrued expenses involve increasing expenses and increasing liabilites
47
Accrued Revenues
Revenues earned in a period that are both unreccorded and not yet recieved in cash ( or other assets); adjusting entries for recording accrued revenues involve increasing assets and increasing revenues
48
Closing Entries
Entries recorded at the end of each accounting period to transfer end-of-period balances in revenue, gains, expense,loss and with drawl (dividend for a corporation) accounts to the capital account (to retained earning for a corporation)
49
Beginning Inventory + Purchases = Merchandise Available
BIPMA
50
Ending Inventory Calculation
Ending Inventory = (Beginning Inventory + Net Purchases) - (Cost of goods sold)
51
Net Sales Calculation
Net sales is total revenue, less the cost of sales returns, allowances, and discounts. For example, if a company has gross sales of $1,000,000, sales returns of $10,000, sales allowances of $5,000, and discounts of $15,000, then its net sales are calculated as follows: $1,000,000 Gross sales - $10,000 Sales returns - $5,000 Sales Allowances - $15,000 Discounts = $970,000 Net sales
52
Basic Merchandising Journal Entries
``` Merchandise Inventory Cash Accounts Payable Merch Inv. Cash Accts Payable Merch inv Cash ```
53
Valuation Method
Means employed by an adjuster to determine the occurrence of a loss and affixing a monetary value to it before processing a claim. The adjuster must establish that (1) the insured actually suffered a monetary loss, (2) the loss was covered in the insurance policy, (3) the monetary value of the loss or damage, and (4) estimated cost of repair or replacement. ASK KEN
54
Consistency Concept
Principle that prescribes use of same accounting methods over tome so that financial statements at comparable across periods
55
Full Disclosure Principle
Principle that prescribes financial statements (including notes) to report all relevant information about an entity's operations and financial conditions
56
LCM
Lower of cost or market: Required method to report inventory at market replacement cost when that market cost is lower than recorded cost
57
5 Principles
``` Control Principle Relevance Principle Compatibility Principle Flexibility Principle Cost-Benefit Principle ```
58
Control Principle
``` Prescribe that an accounting information system have internal controls Internal controls ( are methods and procedures allowing managers to control and monitor business activities. ```
59
Relevance Principle
Prescribes that an accounting information system report useful, understandable, timely, and pertinent information for effective decision making.
60
Compatibility Principle
Prescribes that an accounting information system conform with a company's activities, personnel, and structure.
61
Flexibility Principle
Prescribes that an accounting system be able to adapt to changes in the company, business environment and needs of decisions makers.
62
Cost-Benefit Principle
Prescribes that the benefits from an activity in an accounting information system outweigh the costs of the activity.
63
Specials Journals
Any journal used for recording and posting transactions 0f a similar type
64
Control Account
An account receivable is said to control the accounts receivable ledger and is called a controlling account
65
Subsidiary Ledger
Since the accounts receivable ledger is a supplementary record controlled by an account in the general ledger List of individual subaccounts and amounts with a common characteristic; linked to a controlling account in the general ledger
66
7 Principles of Internal Control
All and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company polices (278,318, 738) Establish Responsibility Maintain Adequate Records Insure assets and bond key Employees Separate Record keeping from custody of assets Divide responsibility for related transactions Apply technological controls Perform regular and independent reviews
67
Establish Responsibility
Responsibility for a task is clearly established and assigned to one person
68
Maintain Adequate Records
Good record keeping is part of an internal control system
69
Insure Assets and Bond Key Employees
Good internal control means that assets are adequately insured against casualty and that employees handling large amounts of cash and easily transferable assets are bonded
70
Separate Record keeping from custody of assets
A person who controls or has access to an asset must not keep that assets accounting records
71
Divide responsibility for related transactions
Good internal control divides responsibility for a transaction or a series of related transactions between two or more individuals or departments
72
Apply Technological Controls
Cash registers, check protectors, time clocks, and personal identification scanners
73
Fraud Triangle
Three factors must exist for a person to commit a fraud: Opportunity, Pressure, and rationalization
74
Petty Cash
Small amounts of cash in a fund to pay minor expenses; accounted for using an imp rest system Used only for business expenses
75
Bank Reconciliation - Add/deduct
Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement
76
Credit Card Transactions
P. 365
77
Allowance for Doubtful Accounts
P.367
78
Notes Receivable - Interest
P. 374
79
Lump-Sum Purchases
We allocate the cost of the purchase among the different types of assets acquired based on their relative market values, which can be estimated by appraisal or by using the tax-assessed valuations of the assets P398
80
Depreciation all three
(Straight line, unites of production, and double declining ) P 403
81
Disposal of Assets
Inadequacy: Refers to the insufficient capacity of a companies plant assets tot meet its growing productive demands Obsolescence: refers to the condition of a plant asset that is no longer useful in producing goods or services with a competitive advantage because of new inventions and improvements P399 408
82
Depletion (Units of Production) Natural Resources
410 is the process of allocating the cost of a natural resource to the period when it is consumed.
83
Amortization (Straight- Line) - Intangible Assets
Process of allocating the cost of an intangible asset to expense over its estimated useful life Only do on a limited life (p. 411)
84
Notes Payable - Interest
442-443
85
Payroll
445-460

Accounting (1 decks)

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