churchman final

Who is in charge of accounting stuff now?

FASB

Who are the parties that are involved in standard setting?

FASB, SEC, AICPA

What are financial statements good for?

Making decisions

What are the elements of the financial statements?

Assets

Liabilities

Equity

Investment by owners

Distribution to owners

Comprehensive income

Revenues

Expenses

Gains

Losses

What is assumption is when a company keeps its activity separate from its owners and other businesses?

Economic Entity

Which assumption finds if a company can last long enough to fulfill objectives and commitments?

Going concern

Which assumptions says that money is the common denominator and that the effect of inflation is ignored?

Monetary Unit

Which assumption says a company can divide its economic activities into time periods?

Periodicity

The most commonly used measurements are based on historical cost and fair value

Measurement Principle

Requires that companies recognize revenue in the accounting period in which the performance obligation is satisfied

Revenue Recognition

What do the expenses follow?

Revenues

The cost of providing information must be weighed against the benefits that can be derived from using it

Cost Constraint

What are the three categories under revelence?

Predictive value

Confirmatory value

Materiality

What are the three categories under faithful representation?

Completeness

Neutrality

Free from error

Liabilities + Equity =

Assets

What is the normal balance of an asset?

Debit

What is the normal balance of a liability?

Credit

What is the normal balance for equity?

Credit

What is the normal balance for expenses?

Debit

What is the normal balance for revenues?

Credit

What is a normal balance?

The increased side

What do adjusting journal entries do?

Update the accounts

Adjusting entry for prepaid expense

Expense

Prepaid Asset

Adjusting entry for unearned revenue

Unearned revenue

Revenue

Adjusting entry accrued expense

Expense

Payable (liab.)

Adjusting entry accrued revenue

Receivable

Revenue

Adjusting entry depreciation

Depreciation expense

Accum. depreciation

Adjusting entry bad debt

Bad debts expense

Allowance for bad debt

Which accounts are temporary?

Revenues, expenses, dividends (accounts that get set back to zero)

Which accounts are permanent?

Assets, Liabilities, Equity (move over to the next term)

Accounting Cycle Steps

1. Analyze business transactions

2. Journalize the transactions

3. Post to ledger accounts

4. Prepare a trial balance

5. Journalize and post adjusting entries

6. Prepare an adjusted trial balance

7. Prepare financial statements

8. Journalize and post closing entries

9. Prepare a post-closing trial balance

High degree of abnormality and a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the company, taking into account the environment in which it operates.

Unusual gains/losses

A loss on impairment is still....

Continued operations

Occurs when a company eliminates the results of operations of a component of the business, or the elimination of a component that represents a strategic shift, having a major effect on the company's operations and financial results.

Discontinued operations

The allocation of tax within a period. Helps users understand the impact of income taxes on the various components of net income. It is used for income from continuing operations and discontinued operations.

Intraperiod tax allocation

Changing FIFO to average cost of changing from percentage-of-completion to the completer-contract method.

Change in accounting principle

Accounted for in the period of change or the period of and the future periods if the change affects both. Useful lives and salvage values of depreciable assets or allowance for uncollectable receivables.

Change in accounting estimates

Result from mathematical mistakes, mistakes in application of accounting principles, or oversight or misuse of facts.

Corrections of errors

Changes equity but doesn't go through the income statement. All changed in equity during a period except those resulting from investments by owners and distributions to owners.

Comprehensive income

A significant business indicator. Measures the dollars earned by each share of common stock. Must be disclosed on the income statement.

EPS

How to calculated EPS?

(Net income - preferred dividends) / weighted average of common shares outstanding

Balance Sheet

Assets

Current Asset

Cash

ST investments

Receivables

Inventories

Prepaid Expenses

LT investments

PPE

Intangibles

Prepaid

Deferred income tax

Liabilities

Current liabilities

NP

AP

Unearned revenue

Income tax payable

LT debt

SE

Paid in capital

Common stock

Preferred stock

RE

If you invest in land, where does it go on a balance sheet?

Investments

Working capital formula

Current assets - current liabilities

Current ratio formula

Current assets / current liabilities

Quick (Acid test) ratio

(Cash + ST investments + receivables) / current liabilities

Balance sheet classifications are based on....

Liquidity

How the asset is used

Management's intentions

What is the order of a statement of cash flows?

CFFOps