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Generally Accepted Accounting Principles
Financial Accounting Standard Boards
When reports are intentionally altered to not follow GAAP resulting in fraud?
COOKING THE BOOKS
The review of a company's financial statement by an independent part to determine if statements are correct and confirm to GAAP
The 7 things Accountants do:
- 1. Record and maintain all financial activities
- 2. Create, maintain, adn record payroll info.
- 3. Record all payments made
- 4. Record all purchases and maintain inventory
- 5. Record and maintain all property records
- 6. Record and process all local, state, and federal tax returns including payroll and property tax returns.
- 7. Prepare all financial statements and reports.
The Fundamental Accounting Equation:
Assets = Liabilities + Owners Equity
- - The items your business owns
- - Anything that you could sell
- - Such things are cars, building, houses, office equipment, etc.
- - Anything a business owes or has to pay.
- - Such things are credit card debts, bank loans, or buying merchandise on credit from another company.
- The investment an owner or investor made in terms of money to run the company.
-LOOKING AT AN INCOME STATEMENT WE SEE THAT:
- - Expenses are negative numbers and its quite common to NOT use any Parentheses.
- - Financial statements are read from TOP to BOTTOM, not from left to right.
- - Dont need to put the dollar sign on every number but definitely on the FIRST NUMBER adn on the FINAL TOTAL NUMBER.
- - A single underline in a statement is a result of a NUMERICAL CALCULATION.
- - A double underline in a statement is the final number in a financial report, the bottom line of a statement that represents the final calculation.
- The Accumulation of things overtime.
- Wealth or Profit is Accrued Revenue.
- Loss or Debt is Accrued Expense.
The cost of the asset spread out over its expected lifespan.
- - The outstanding balance, also known as negative balance or liability is the money that is owed or past due.
- - if returned to balanced state, it becomes zero or positive status which means overpayment.
Demonstrates how the holding company is doing as a collective group.
CONSOLIDATED FINANCIAL STATEMENT
- - Could also be known as a delay.
- - Assets or Liabilities considered in future dates like annuities, charges, taxes, income.
- Assets that have a limited, fixed lifespam like cars, jewelry, and other mateiral goods.
DOUBLE-ENTRY BOOKKEEPING SYSTEM
Each transaction is entered twice so each debit value needs a corresponding credit value to make sure all transactions balance out in the end.
A balance sheet and an Income Statement
Its a 12-month BUSINESS period used to calculate annual financial reports.
- - Also known as NOMINAL LEDGER
- - Its the principal accounting record for a business that uses double-entry bookkeeping system.
The Categories that includes in a General Ledger:
- - Current Assets
- - Fixed Assets
- - Liabilities
- - Revenue Items
- - Expense Items
- - Gains
- - Losses
Expense Column should equal or match the revenue column. Yet when matched they are not recognized until associated revenue is also recognized.
- - Operating Cash Flow
- - The available funds form operating activities
- - Amount of revenue less the costs from long-term investments on capital items or security investment.
- - American Institute of Certified Public Accountants
- - Are the people in U.S.A. to train and give guidance to CPAs
- - Their core purpose is to make sense of a changing and complex world.
- - They believe CPAs should demonstrate the core values of lifelong learning, competence, integrity, and objectivity.
- - Should be accustomed to "macro" more than "micro"
What are the services the AICPA belive CPAs should provied:
- - Communication of the total picture with clarity and objectivity
- - Translation of complex info to clear critical knowledge
- - Anticipate and Create New Opportunities
- - Design pathways to make visions into reality
- - Federal Accounting Standards Advisory Boards
- - Establishes Accounting Principles for federal entities and monitors their compliance