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Accounting > Mid Term 1 > Flashcards

Mid Term 1 Flashcards

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1
Q

Bank reconciliation

Bank side

A

Beginning Balance
+ deposits outstanding
- checks outstanding

+/- Bank Error

Ending Balance

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2
Q

Bank reconciliation

Company side

A 
Beginning Balance
\+ collections note 
\+ interest 
- ETF 
- NSF
- Debit card
- Bank Service Fee 
\+/- error 
Ending Balance
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3
Q

DEAD CURLS

A

Debit increase
Expense
Assets
Dividends

Credit increase
Unearned revenue (deferred) 
Revenue 
Liabilities 
Stock Holders Equity
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4
Q

Primary purpose of bank reconciliation

A

Ensure the bank balance per reconciliation equals to the company balance per reconciliation

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5
Q

Ending retained earnings =

A

ERE= BRE + Net income - dividends

Therefore

Change in RE = Net income - dividends

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6
Q

Basic accounting equation

A

Asset = Liabilities + Stockholder Equity

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7
Q

Stock holder Equity =

A

Retained earnings + Contributed capital (common stock)

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8
Q

Net income =

A

Revenue - expenses

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9
Q

Adjusting entries rules

A

They don’t deal with cash

They at least have

  • 1 income statement item
  • 1 balance sheet item
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10
Q

What is the revenue recognition principle

A

The time you would book revenue

2 rules:

  • when service is provided
  • when we believe we will be paid
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11
Q

Two types of accounting

A

Financial accounting

Managerial accounting

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12
Q

Financial accounting

A

Accounting Designed for decisions makers outside of the company

Outside

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13
Q

Managerial Accounting

A

Accounting designed primarily for decision makers within the company

Within

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14
Q

Sole propitiatorship

A

Business owned by one

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15
Q

Partnership

A

Business owned by two or more people

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16
Q

Corporation

A

Business is legally separated from its owners

Limited liability of stockholder

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17
Q

Four fundamental activities of for profit firms

A

Establish goals and strategies
Obtain financing
Make investments
Conduct operation

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18
Q

Two ways to obtain financing

A

Debit financing from creditors (liabilities)

Equity financing from owners (stockholder equity)

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19
Q

Short term asset

A

Resources used quickly

Inventory

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20
Q

Long term asset

A

Resources used for over long periods of time

Equipment

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21
Q

Business activities

FIO

A

Financing (investors or creditors)

Investing (purchasing things for company)

Operating

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22
Q

Accounting system

A

The process by economic data are gathered, tabulated, summarized, and communicated by way of financial statements

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23
Q

Accounting cycle

A

Specific steps in construction financial statement

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24
Q

What kind of financial statement reports at point in time

A

Balance sheet

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25
What kind of financial statement reports at period of time
Statement of cash flows Statement of stock holders equity Income statement
26
Element of high quality financial info
High quality accounting standards -GAAP (generally accept acct principles) High quality auditing standards - PCAOB (public company accounting oversight board) - public traded company must be audit other companies elect to be audited Regulatory oversight or monitoring - SEC (securities and exchange) monitor public company
27
Characteristic of high quality financial info
Relevant Representational Comparable
28
Use accounting info to asses
Profitable Operation efficiency Liquidity Value creation
29
Return on equity (ROE) =
Net income/ owners equity
30
Return on assets =
Net income/ total assets
31
Gross margin =
(Sales-cost of goods sold) / sales
32
Profit margin =
Net income / Sales
33
Income statement
Revenues - expenses = net income If negative net loss If pos net gain
34
Balance sheet
Financial position: Resources = Liabilities and stockholder Equity
35
Statement of stockholders equity
Common stock - external source Retained earning - internal sources
36
Statement of cash flows
Operating cash flow (rev and exp) Investing cash flow (purchase) Financing cash flows (lenders and stockholders)
37
Assets
Resources owned
38
Liabilities
Amounts owed
39
Stockholder Equity
Owners claim to resources
40
Dividends
Distribution to stockholders
41
Revenue
Amount earned from sales of product or services
42
Expenses
Cost of selling product or services Operating
43
Common stock is a what
Stock holder equity account Sell stock to investors
44
Cash is a what
Asset
45
Salaries payable is a
Liability
46
Service rev is a
Revenue
47
Utilities expenses is a
Expenses
48
Supplies is a
Asset
49
Advertising expense is
Expense
50
Building is a
Asset
51
Account payable is a
Liability
52
Divendens is a
Stockholder Equity or dividend
53
Expenses and revenues are located in what sheet
Income statements
54
Balance sheets have what
Accounts payable Common stock Accounts receivable Retained earning
55
Temporary accounts RED IS DEAD (you close the accounts after adjusting, so you zero out) Permenant account is retained earning
Revenue Expenses Dividend
56
Accrual accounting
Recognize revenue when it is earned Recognize expenses when they are incurred
57
When working with interest and time use? When adjusting
PRT principle (starting) x rate x time (x/12)
58
Everything must what
BALANCE
59
To find change in cash flows
Change Op (operating cash) + Change investing (money we get on property plant equipment) + Change finance (contributed capital and loans )
60
What does PPE mean
Property Plant Equipment
61
What does this mean when you have ( number )
Negative number
62
Reason for incorrect financial statement
Error (most common) Fraud
63
Reasons for fraud | OMR
Opertunity Motivation Rationalization
64
SOX act of 2002 | Established internal controls and auditor client relations
``` Oversight board Cooperate exec accountability Non audit service Retention of paper Auditor rotate Conflicts of interest Hiring of auditor Internal control (Only on public companies) ```
65
Oversight board
PCAOB (public company acct oversight board)established
66
Corporate exec accountability
Corporate exec accountable for business
67
Non audit service
Against law for auditor to perform non audit services for company
68
Retention of papers
Gotta keep papers for 7 years
69
Auditors rotation
Lead auditor must change every so often (every 5 year)
70
Hiring auditors
Cannot he hired by company must be hired by board of directors
71
Internal control
Ceo and cfo certify internal control Manager and auditor attest to effectiveness of internal control and reveals material weakness in internal control
72
Components of internal control | Pyramid
Monitoring Control activities Risk assessment Control environment (most important)
73
Elements of internal control (get controlled environment) | HES DIP
Human resource control Establishment of responsibilities Segregation of duties Documentation of procedures Independent internal verification Physical controls
74
Establishment of responsibility’s
Make people responsible One person is responsible for one thing Be authorized for certain things
75
Segregation of duties
Different people responsible for different things
76
Documentation procedure
Prenumber documents | - all accounted for
77
Physical controls
``` Alarms Safes Monitors Camera Password etc ```
78
Independent internal verification
Founding principle - records periodically verified by an independent employee to see difference - look for discrepancy
79
Human resource
Bond employees Rotate employees on duty (give vacations ) Conduct background check
80
Detective controls
Reconciliations - make accounts record see if same Performance reviews Audits Things you don’t see
81
Petty cash
Small amount of cash kept on hand to pay minor purchase (expenses)

Accounting (2 decks)

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