ACCT 2301 Midterm Exam Study Sheet

FASB/GAAP

Governing bodies and principles of accounting.

Assets

Resources owned by the company.

Liabilities

Obligations owed.

Stockholders’ Equity

Ownership interest (Common Stock + Retained Earnings).

Net Income

Revenues - Expenses.

Dividends

Profits distributed to stockholders.

Accounting Equation

Assets = Liabilities + Stockholders' Equity

Retained Earnings Calculation

Beginning RE + Revenues - Expenses - Dividends = Ending RE

Income Statement

Performance (Revenues - Expenses = Net Income).

Balance Sheet

Financial position at a specific time.

Statement of Cash Flows

Cash inflows/outflows by activities (Operating, Investing, Financing).

Accounts Payable/Receivable

Money owed/earned but not yet paid/received.

Accrual

Recognizing revenues/expenses when earned/incurred.

Matching Concept

Match revenues with related expenses.

Accrual vs. Cash Accounting

Accrual: Record revenues/expenses when earned/incurred. Cash: Record only when cash is received/paid.

Deferred Revenue/Expenses

Cash received/paid before services are performed/expenses are incurred.

Accrued Revenue/Expenses

Services performed/expenses incurred before cash is received/paid.

Prepaids (Deferred Expenses)

Formula: Beginning Supplies + Purchased Supplies - Used Supplies = Ending Supplies.

Unearned Revenue (Deferred Revenue)

Cash received → Recognize revenue when earned.

Accrued Revenue

Service performed → Record accounts receivable → Collect cash.

Accrued Expenses

Record expense → Pay cash later.

Receiving cash from investors

+ Assets, + Stockholders' Equity

Common Transaction Example: Borrowing money

+Assets, + Liabilities.

Common Transaction Example: Providing services for cash

+Assets, + Revenues

Common Transaction Example: Paying expenses

-Assets, - Retained Earnings.