ACCT 203 Exam 3 Comprehensive Review Outline

What is US GAAP?

stands for United States Generally Accepted Accounting Principles, which are the accounting standards used in the U.S.

What are the four major financial statements?

Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Changes in Equity.

What is the balance sheet equation?

Assets = Liabilities + Equity.

cash accounting

recognizes revenues and expenses when cash is exchanged

accrual accounting?

recognizes them when they are earned or incurred, regardless of cash flow.

debits

increase assets and expenses, and decrease liabilities and equity

credits

decrease assets and expenses, and increase liabilities and equity

What is the structure of the balance sheet?

assets listed first, followed by liabilities, and then equity.

What are adjusting journal entries?

made at the end of an accounting period to update account balances before financial statements are prepared.

What is the closing process in accounting?

transferring temporary account balances to permanent accounts at the end of an accounting period.

What are internal controls?

to ensure the integrity of financial and accounting information, and to prevent fraud.

What are the five categories of internal controls?

Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities.

What is a bank reconciliation?

compares the bank's records with the company's records to ensure they match.

What are the types of companies in accounting?

manufacturing, service, and merchandising

How do you calculate Net Sales?

calculated by subtracting sales returns, allowances, and discounts from total sales.

What are the periodic inventory cost flow assumptions?

LIFO (Last In, First Out), FIFO (First In, First Out), and Weighted Average.

What is the allowance method for bad debts?

estimates uncollectible accounts and records them as an expense in the same period as the related sales.