Flashcards in Chapter 3: Study Guide Material Deck (16):
Every Transaction Must Affect How Many Accounts?
-at 2 least accounts
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
Measurements Issues Associated with Recording Transactions?
1) Source document is prepared (by non-accountant)
2) Account analyzes the transaction (the accounting event)
3) Records Business Transaction
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
What does trial balance list?
all of the individual accounts with their ending debit or credit balance
Issues Related to Determining Net Income?
-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
GAAP AND IFRS who uses historical cost and fair value more?
-GAAP uses historical cost more
IFRS uses more fair value assets
Impediments to IFRS
-changes to accounting systems
-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
What does a general ledger have?
the overall total
Balances in the Ledger end up on what 3 financial statements?
-Balance sheet, Income Statement, or Statement of Retained Earnings
What do ledgers summarize?
all the transactions that affect each and every account
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
What are the requirements to be a recorded transaction?
-have to quantifiable
- based on past transaction
-written in debit-credit form