The Fundamentals of Accounting
Card Set Information
The Fundamentals of Accounting
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
- Revenue Items
- Expense Items
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