Accounting Midterm 1

Name the types of assets

Cash, Accounts receivable, supplies, equipment, Accumulated depreciation

Current assets

Cash, A/R, Inventory, Prepaid expense, short term investments

Liabilities

Account payable, short term debut, deferred revenue

Deferred revenue

Unearned revenue the company receives in advance for a good or service it will provide in the future

Temporary accounts

revenue, expenses, dividends

define Dividends

company paying money to shareholders

Retained earnings are what accounts?

Expenses, revenues, dividends

Adjusting entries

journal entries made at the end of the period

Accrual accounting

recording revenue when it was earned rather than when the cash is received

Accrued expense

Cash before service provded :

1) prepaid expense (an asset)

2) Deferred revenue (a liability)

Accrued revenue

Service provided before given cash:

1) Accrued expense (a liability)

2) Accrued revenue (an asset)

Assets =

Liabilities + Stockholder's Equity

Net income = ?

Revenue - expenses

Change in stockholder's equity = ?

Issue common stock + Net income - Dividends

Issue common stock

when a company sells shares of its stock to investors in order to raise capital

Total change in cash flows = ?

operating cash flows + investing cash flows + financing cash flows

DEA 🔴LOR

Dividends

Expenses

Assets

🔴Liabilities

🔴Owner's (stockholder's) equity

🔴Revenue

Operating cash flows

the cash a business generates from its regular operations within a specific time period

Cash

Asset

Debit +

🔴 Credit -

Accounts Payable

Liability

Debit -

🔴 Credit +

Revenue

Liability

Debit -

🔴 Credit +

Accounts receivable

Asset

Debit +

🔴 Credit -

Common stock

Stockholder's equity

Debit -

🔴 Credit +

Expense

Asset

Debit +

🔴 Credit -

Supplies

Asset

Debit +

🔴 Credit -

Retained earnings

Stockholder's equity

Debit -

🔴 Credit +

Dividends

Asset

Debit +

🔴 Credit -

what are the 3 financial statements for the accounting cycle?

income statement, statement of stockholder's equity, balance sheet

income statement shows

company's performance over a period of time

statement of SE shows

changes of company's equity over a period of time

balance sheet shows

company's performance during a specific date at the end of the accounting period

components of income statement

Revenue, Expenses, total expenses, net income

components of statement of SE

common stock beg balance

RE beg. balance

issuance of common stock

add net income

less dividends

ending balance

in staement of se, ____ isn't included for retained earnings

issuance of common stock

in statement of SE, ____ isn't included for common stock

add net income

in statement of SE ____ isn't included for common stock

less: dividends

components of balance sheet

assets - current assets, long term assets, total for both

less accumulated depreciation

liabilities - total

equity, total equities

total assets

total liabilities and SE

in balance sheet, what also goes in the long term assets section?

less accumulated depreciation

what do internal controls represent

1) company's plan to safeguard its assets

2) improve accuracy and reliability of accounting info.

what is occupational fraud

MISUSE and MISAPPROPRIATION of employer's resources

companies expecting to lose _____ percent of total revenues to fraud each year

5%

Fraud triangle:

opportunity, motivation, rationalization

Sarbanes Oxley Act (SOX)

federal law to protect investors from fraud by "the man" (AKA man protection)

PCAOB - public company accounting oversight board

created by SOX to oversee audits

components of internal control

monitoring, control activities, risk assessment, control environment

statement of cash flows

Financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing.

Securities and exchange commission (SEC)

protecting securities markets and investors

Generally accepted accounting principles

rules and procedures to standardize accounting

which financial statement conveys a company's ability to generate profits in the current period?

income statement

why does financial acc. have a positive impact on our society

allows investors to stay away from shitty companies and stick with the good ones

financial accounting and reporting standards are established by

Financial accounting standards board (FASB)

what are the 2 fundamental characteristics from FASB conceptual framework?

relevance and faithful representation