Studied by 3 people
Revenue Recognition Principle
revenue is recognized when good or services are provided to customers and at the amount expected to be received from the customer
Business Entity Assumption (entity concept)
a business is accounted for separately from other business entities and its owner
Going Concern Assumption
accounting information presumes that the business will continue operating instead of being closed or sold
Cost Principle (measurement principle)
accounting information is based on actual cost; cost is measured on a cash/cash-to-equal basis
Matching Principle (expense recognition principle)
a company records the expenses it incurred to generate the revenue reported
Full Disclosure Principle
a company reports the details behind financial statements that would impact users’ decisions
Assets
resources a company owns that are expected to yield future benefits
Liabilities
creditor’s claims on assets (things you owe)
Equities (capital)
owner’s claim on assets; the sum of assets subtracted from liabilities
Revenues
money that a company earns from sale of products or services
Expenses
cost of providing products and services to customers
Sole Proprietorship
1 owner
No additional business income tax
The owner is responsible for proprietorship debt
Not a separate legal entity
The business ends with owner death or choice
Partnership
2 or more owners
No additional business income tax
Partners are jointly responsible
Not a separate legal entity
Business ends with partner death or by choice
Corporation
1 or more (shareholders)
Additional corporate income tax
Shareholders not responsible for debt
Separate legal entity with same responsibilities
Indefinite business life
Limited Liability Company (LLC)
1 or more owners (members)
No additional business income tax
Members not liable for debts
Separate legal entity with same responsibilities
Indefinite business life
Financial Accounting
focuses on the needs of external users and must follow GAAP
Managerial accounting
focuses on the needs of internal users
Internal user
directly manage the organization
External users
do not directly run the organization and have limited access to the accounting information (gets info from general-purpose financial statements)
Opportunity
must be able to commit fraud with low risk of getting caught
Pressure
must feel pressure or have incentive to commit fraud
Rationalization
justifies fraud/ignores criminal nature
Income Statement
Revenue - Expenses = Net Income
Statement of Owner’s Equity
Beginning capital + owner’s investments + net income - withdrawals = end capital
Balance sheet
assets = liabilities + equity
Statement of Cash Flows
(+/-) Operating cash flows (-/+) Investing cash flows (-/+) Financing Cash flows = Change in cash
Type: asset
Normal Balance: debit
Statement: balance sheet
Prepaid Insurance
Type: liability
Normal Balance: credit
Statement: balance sheet
Magazine subscription collected in advance
Type: withdrawal
Normal Balance: debit
Statement: balance sheet/ statement of owner’s equity
C. David, Withdrawals
Type: revenue
Normal balance: credit
Statement: income statement
sales
Type: Capital
Normal Balance: Credit
Statement: balance sheet
C. Pen, Capital
Type: expense
Normal Balance: debit
Statement: Income statement
Utilities Expense
Securities and Exchange Commission
SEC stands for
Chief executive officer
CEO stands for
Financial Accounting Standards Board
FASB stands for
International Accounting Standards Board
IASB stands for
International Financial Reporting Standards
IFRS stands for
American Institute of Certified Public Accountants
AICPA
Generally Accepted Accounting Principles
GAAP
revenue - expenses
net income equals
net income/average total income
return on assets equals
total liabilities / total assets
debit ratio equals
The date of the transaction
the title of accounts debited and the amount
the title of accounts credited and the amount
a brief explanation of the transaction below the line of entry
A journal entry requires
Note 
Flashcard (22)