Chapter 1 Review
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Accounting is an information and measurement system that identifies, records, and communicates; relevant, reliable , and comparable information
Define Record/Book Keeping
recording of transactions and events
Define Financial Accounting
Financial Accounting serves external users by providing them with general-purpose financial statements.
Define Managerial Accounting
Managerial Accounting serves internal users with reporting to help make decisions
Name 3 Internal and External Users of Accounting
- 1.Accounting employees
- 4. Auditors
- 5. Sales Staff
- 1. Lenders
- 2. Consumers
- 3. External Auditors
- 4. Governments
- 5. Share Holders
Assets are resources a company owns or controls to yield future benefits.
Equiptment, Buildings, Land, Cash
Receivables refer to an asset that promises a future inflow of resources. A company that provides a service or product on credit is said to have an accounts receivable from that customer.
Liabilities are creditors claims on assets reflect companies obligations to provide assets products or services to others.
Payable refers to a liability that promises a future out flow of resources
Wages, AP, Notes Payable, Taxes Payable
Equity is an owners claim on assets.
Equity= Assets - Liabilities
What is GAAP
Generally Accepted Accounting Principles
are concepts and rules for ethical accounting
Securities and Exchange Commissions
is a government agency that has the legal authority to set GAAP
Financial Accounting Standards
This is a local private board that sets both broad ans specific principles
International Accounting Standards Board
is an independent group that issues IFRS
International Financial Reporting Standards
Identify international preferred accounting practices
- 1. Measurement Principle AKA Cost Principle
- Based on actual cost
- 2. Revenue Recognition
- States when a company must
- recognize when revenue is incurred
- 3.Expense Recognition AKA Matching
- States when an expense is incurred
- 4. Full Disclosure Principle
- State that a Company must report
- details behind financial statements
- that would impact users decisions.
1. Going Concern Assumption
- Assumes that a business will continue
- and report at cost
- 2. Monetary Unit Assumption
- Assumes that we can express
- transactions and events in a monetary or
- monetary or money units
- 3. Time Period Assumption
- Assumes that a life of a company can be
- broken into time periods
4. Business Entity Assumptions
- Assumes that a business is accounted for
- seperatly from other entities
IS describes a companies revenues and expenses along with the resulting net income or loss over a period of time due to earnings and activities
Statement of Owners Equity
Explains Changes in Equity from net income or loss and from any owner investments and withdraws over a period of time
Describes a company's financial position (types and amounts of assets liabilities and equity) at a point in time.
Statement of Cash Flow
Identifies cash inflows receipts and cash outflows , and payments over a period of time.
Equity - Assets
Assets - Liabilities
Breakdown of Equity includes
+Owner capital - Owner Withdraws + Revenues - Expenses
Assets = Liabilities + Owner capital - Owner Withdraws + Revenues - Expenses
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