Accounting 301 Exam 1

Accounting 301 with Carcello at University of Tennessee - Knoxville

About this deck

By: Connor Boyle
Textbook:

Principles of Accounting: Tools For Business Decision Making (Special Edition for Montgomery County Community College Accounting 111 and 112)

Study Guide, Volume 1, Chapters 1-14 to accompany Financial Accounting 13e, and Financial & Managerial Accounting 14e
Created: 2012-02-13
Size: 38 flashcards
Views: 183

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SEC

Securities Exchange Commission

- Relies on Financial Accounting Standards Board to develop accounting standards

- Relations beocome strained when FASB doesnt act quickly

AICPA

American Institute of Certified Public Accountants

- Important contributor to GAAP

- Created Accounting Principal Board - 18 members

FASB

Financial Accounting Standards Board

- Replaced APB

- 5 members only 2 can have CPA

- Sever ties with previous employeers

Statement of Financial Accounting Concepts

- not establish GAAP

- develops future standards

GAAP

Generally Accepted Accounting Principles

- Found on Codification Research System

- Rules to abide by in accounting

Sarbanes-Oxley Act

- Established Oversight (Public Company Accounting Oversight Board)

- CEO CFO personally certify financial statements

- Audited by external members

IFRS

International Financial Reporting Standards

- Issued by International Accounting Standards Board (IASB)

- US companies overseas still use GAAP (US accounting standards)

- By 2016 world will use iGAAP

Types of accounting information

Tax, Management, Financial

Financial Accounting

General Purpose

- Assisting where to place investments

- Tax Returns

Management Accounting

- Assit in Operation by telling managers how much money, what and how much inventory, and amounts owed to creditors

Tax Accounting

- Preparation of income tax returns, to specific requirements

Double-Entry Accounting

Debit and Credits equal

Dividends

Reduce R/E which reduces Owners Equity --> Beg RE+NI-Div=End RE

Does not affect NI

Realization Principle

Revenue recorded when goods are sold or services are rendered

Matching Principle

Offset expense against revenues during the same period

-gives you NI

Objectivity

Evidence that an expense will produce revenue in future periods

Conservatism

Apply accounting treatment that will record the NI for the period

Accrual Basis

Record in period when Rev earned or Exp used

-most important principle is Matching

Short term

1 period

- Assets acquired and used in one period will be an expense

-same with liabilities (wages exp)-maybe look up

Long Term

More than 1 period

-Assets acquired in one period but used in multiple periods will be recorded as an Asset

Adjusting Entries

Rev Exp NI Assets Liab OE

1 NE I D D NE D

2 I NE I NE D I

3 NE I D NE I D

4 I NE I I NE I

Type 1

Converting Assets to expense

Debit: Expense Account

Credit: Asset Account

Equipment

Type 2

Converting Liabilities to Revenue

Debit: Liability Account

Credit: Revenue Account

Unearned rent rev - earned. this will become rev

Type 3

Accruing Unpaid Expense

Debit: Expense Account

Credit: Liability Account

A/P

Type 4

Accruing Uncollected Revenue

Debit: Asset Account

Credit: Revenue Account

A/R

Depreciable Assets

Retain size but eventually become obsolete

Depreciation

allocation (straight or double) costs accumulate over life of asset

- not taken out of market value

- Accumulated Depreciation is expensed in book value

Contra-Asset

example : Accumulated Depreciation

Has credit balance and offsets against an asset account

Material vs Immaterial

less than 2-3% is immaterial

-watch out for multiple immaterial journal entries adding up to become Material

Information Disclosed

Lawsuits

Schedule Plant closing

Gov Investigation

Significant events occurring after BS date but before release of Financial statements

Customers that account for more than 10% of revenue

Unusual transactions

Closing Accounts

Rev and Exp to Income Summary

Income Summary to RE

Div to RE

Close Revenue

Rev is a CREDIT account so inorder to close:

Debit: Revenue

Credit: Income Summary

Close Expense

Expense is a DEBIT account so inorder to close:

Debit: Income Summary

Credit: Expense

Income Summary

After Rev and Exp are emptied to Income Summary the balance left over is NI

- If balance is positive IS will have a credit balance

This balance needs to be emptied to Retained Earnings by:

Debit: Income Summary

Credit: Retained Earnings

Closing Dividend

Dividend has a debit balance

-Close directly to RE by:

Debit: Retained Earnings

Credit: Dividend

Liquidity

Company ability to meet its cash obligations as they are due

-Evaluate by comparing receivable & cash to Payables

-balance at one point in time, not indicative because company may be able to generate revenue in upcoming months