Chapter 3: Study Guide Material Flashcards Preview

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Flashcards in Chapter 3: Study Guide Material Deck (16):
1

Every Transaction Must Affect How Many Accounts?

-at 2 least accounts

2

Journal Entries Points

-discloses the complete effect of the transaction in chronological order

-must always keep the accounting equation in balance

-Duality effects- each transaction affects at least two accounts

-written in debit credit form

3

Measurements Issues Associated with Recording Transactions?

-recognition issue
-valuation issue
-classifiction

4

Accounting Cycle

1) Source document is prepared (by non-accountant)
2) Account analyzes the transaction (the accounting event)

3) Records Business Transaction

5

Part 2 Of Accounting Cycle

1) Journal Entries into the journal

2) Post to ledger (final book of entry)

3)Prepare Trial Balance

4) Journalize and post adjusting entries

5) Prepare financial statements

6) Journalize and post closing entries

6

What does trial balance list?

all of the individual accounts with their ending debit or credit balance

7

Issues Related to Determining Net Income?

-Time Period
-Measurement
-Revenue Recognition Policy- defines when revenues are recorded...can be found in footnotes of income statement


-Expense Recognition Principle- all the relevant expenses can be recorded in the same period as the revenues that were generated


-Peripheral Transactions - gains/losses on sales of assets and interest revenue/interest expenses


-income tax expense is often reported separately for corporations

8

GAAP AND IFRS who uses historical cost and fair value more?

-GAAP uses historical cost more

IFRS uses more fair value assets

9

Impediments to IFRS

-training
-educating
-changes to accounting systems
-legal issues
-consistency
-corporate governance

10

Subsidiary Ledger

-provide breakdown of a larger general account

-all the subsidiary ledgers should equal the total of the general ledger

-subsidiary ledgers have a breakdown for each customer and the breakdowns of the customer's activities

11

What does a general ledger have?

the overall total

12

Balances in the Ledger end up on what 3 financial statements?

-Balance sheet, Income Statement, or Statement of Retained Earnings

13

What do ledgers summarize?

all the transactions that affect each and every account

14

conservatism

states where there are choices about the value of assets and liabilities, do not overstate assets or liabilities or revenues


-do not understate liabilities or expenses

15

What are the requirements to be a recorded transaction?

-have to quantifiable
- based on past transaction
-written in debit-credit form

16

what is stockholders' equity also called?

net assets
assets minus liability