ACCT 3366 Overview

Terms to review

Expense recognition

Record expenses in the period the related revenue is recognized.

Periodicity assumption

The life of an enterprise can be divided into artificial time periods.

Historical Cost principle

The original transaction value upon acquisition.

Materiality

Concerns the relative size of an item and its effect on decisions.

Revenue recognition

Criteria usually satisfied for products at point of sale.

Going concern assumption

The entity will continue indefinitely.

Monetary unit assumption

A common denominator is the dollar.

Economic entity assumption

The enterprise is separate from its owners and other entities.

Full-disclosure principle

All information that could affect decisions should be reported.

If REVENUE is OVER, NET INCOME is

Overstated

If EXPENSES are OVER, NET INCOME is

Understated

If NET INCOME is OVER, STOCKHOLDERS EQUITY is

Overstated

Dividends do/do not impact net income

DO NOT

Current Ratio=

Current Assets/Current Liabilities

Acid-Test Ratio

Quick Assets (cash and acc rec.)/Current Liabilities

Quick Assets: Current assets-prepaid expenses-inventory

Debt to Equity Ratio

Total Liabilities/Total Equity (common stock+retained earnings)

Ordinary Annuity

Cash payments made at the END of each period

Annuity due

Cash payments made at the BEGINNING of the period

A type of annuity where payments occur at the start of each period rather than at the end.

Current Assets

cash equiv - 90 days or less

short term inv. - beyond 3mos and less than 3mos that are expected to be converted into cash or consumed within one year.

accounts receivable is a contraasset acct

inventory - finished goods inv., work in process, raw material

prepaid - seperate it out based on time -1yr is current and rest of years is long term asset

Long-Term Assets

more than a year

investments

property, plant, and equipment land never depreciates and accumulated depreciation on ALL assets (except land)

intangible assets

Cash to Revenue Receipts

If AR goes up/down it is ±

If DR goes up/down it is ±

AR decreases (-)

AR increases (+)

DR decreases (+)

DR increases (-)

Cash to Expenses

If any CA apart from AR goes up/down it is ±

If any CL apart from DR goes up/down it is ±

CA increases (-)
CA decreases (+)
CL increases (+)
CL decreases (-)

A debit increases/decreases which accounts

Increases assets or expense accounts

Decreases liability, revenue, and equity accounts

A credit increases/decreases which accounts

Increases liability, revenue, and equity accounts
Decreases assets or expense accounts

? cougar RED have to be closed

Retained earnings

Expenses

Dividends