1. What GAAP stands for and where it comes from;

   1. Generally

   2. Accepted

   3. Accounting

   4. Principles

      1. Coined by 

         1. SEC - Securities & Exchange Commission,

         2. FASB - Financial Accounting Standards Board

2. The monetary unit assumption

   1. Assumption of transactions and events to be recorded w/ money units i.e USD, Pesos, Euros

   2.  the economic entity assumption (aka business entity assumption)

      1. Requires a business or company to be accounted separately from its owners and from any other entity

   3. the cost principle

      1. Accounting based on actually cost that occur in transactions 

   4. the matching principle

      1. Expenses to be recorded in the same period as revenue that was earned as a result of expenses

   5. the revenue recognition principle

      1. when goods and services are provided to customers

      2. The amount expected to be received by the customer

   6. the full disclosure principle

      1. Details listed in financial statements that are relevant for the users decision making

      2. In footnotes

   7. the time period assumption

      1. An organization’s activity to be recorded and reported in time periods

      2. months/years/quarters

   8. the going concern assumption

      1. Presumption that reflects the continuation of a business on the financial statement

3. The difference between internal users and external users of financial data and examples

   1. Internal Users

      1. People who directly manage the organization

      2. Internal reports are designed for unique needs of managerial or executive employees

      3. Purchasing Managers - need to know what, when, and amount to purchase 

      4. Human resources - information systems about employee payroll, benefits, and performance

      5. Production Managers - use information to monitor costs and ensure quality

      6. Distribution Managers - reports for timely and accurate delivery of products and services

      7. Marketing Managers - Marketing managers use reports to target customers, set prices, and monitor customer needs

      8. Service Managers - use reports to provide better service

      9. Research and development managers - use info on projected costs and revenues of innovations 

   2. External Users

      1. Do not directly run the organization

         1. Lenders - loan money/resources to organization

         2. Shareholders/investors - partial owners of the corporation, buy, hold, sell stocks

         3. External Auditors - examine financial statements to verify preparation

         4. Nonmanagerial, Nonexecutive Employees, Labor Unions - use external information to bargain for better wages

         5. Regulators - legal authority over certain activities of organizations

         6. Voters and government officials - use information to evaluate government performance

         7. Contributors - nonprofits to use information to evaluate use and impact of donations

         8. Suppliers - analyze customer prior to extending credit

         9. Customers - use financial reports to assess stability of suppliers

4. What CPA stands for

   1. Certified Public Accountants 

5. Type of business entities and attributes (e.g. sole proprietor, partnerships, LLC's,

   1. Sole Proprietorship

      1. 1 owner

      2. No added business income tax

      3. Unlimited liability

         1. Owner is fully responsible and library for proprietorship debts 

      4. Not a separate legal entity

      5. Business ends w/ owner death or choice 

   2. Partnership

      1. 2 or more “partners”

      2. No added business income tax

      3. Unlimited Liability, all partners liable for partnership debts

      4. Not a separate legal entity

      5. Business ends w/ a partner death or choice

   3. Corporation

      1. 1 or more shareholders

         1. Can get many investors by selling stock or shares

      2. Additional corporate income tax

      3. Limited Liability

         1. Owners/shareholders/stockholders are not liable for corporate acts and debts

      4. A separate legal entity with the same  rights and obligations as a person

      5. Indefinite

   4. LLC (Limited Liability Company)

      1. 1 or more “members”

      2. No additional business income tax

      3. Limited liability

         1. Members are not personally liable for LLC debts

      4. A separate entity with the same rights and obligations as a person

      5. Indefinite

6. Debits = Credits, and the accounting equation Assets [(1)(BS)(Dr)] = Liabilities [(2)(BS)(Cr)] + Owners' Equity [(3)(BS)(Cr)] +
Revenue [(4)(IS)(Cr)] - Expenses [(5)(BS)(Dr)]

7. Know how Luca Pacioli is

   1. Luca Pacioli, the father of accounting 

8. You should know and understand all types of accounts and their normal balances;

   1. Asset Accounts

      1. Anything with the word “Prepaid”, “Receivable”

   2. Liability Accounts

      1. Anything with the word “Unearned”, “Payable”

   3. Owners Equity Account

      1. Owner, Capital

9. Remember the "normal balance" side is the side that increases an account;

   1. Assets increase with Dr on left and decrease on right with Cr

   2. Liabilities increase with Cr on right and decrease with Dr with left

   3. Equity  increase with Cr on right and decrease with Dr with left

      1. Investments and Revenues increase on right with Cr

      2. Withdraws and Expenses decrease on left with Dr

10. You should understand how account numbers are assigned: Assets have account numbers beginning with a 1, liabilities have account numbers beginning with a 2, equity has account numbers beginning with a 3, revenue has account numbers that begin with a 4, and expenses have account numbers that begin with a 5 and out;

11. You should be able to identity all contra accounts presented within the course; as well as assign account numbers to them and know their normal balance of accounts which is contra to the general classification;

    1. Contra Accounts: Accumulated Depreciation

       1. Ex: Equipment would be classified as Asset, thus is reported Debit on left. Accumulated depreciation of Equipment is also an asset but reported on the right hand side on Credit

       2. E g. Accumulated Depreciation is a contra asset account, has an account number that begins with a 1 (as do all assets/contra-assets) but has a normal balance of a credit;

       3. Other contra accounts include Allowance for Doubtful Accounts aka Allowance for Uncollectible Accounts (contra-asset), 

       4. Dividends/Withdraws/Distributions (contra-equity),


       5. Treasury Stock aka T-Stock (contra-equity), 

       6. Sales Returns and Allowances (contra-revenue), 

       7. Sales Discounts (contra-revenue)

12. You must be able to identify various accounts, what type they are (assets, contra-asset, liability, equity, contra-equity, revenue, contra-revenue, or expense, as well as their associated account number and normal balance

13.  Know how to calculate and record depreciation expense and accumulated depreciation using the straight-line method;

    1. Cost - salvage value / # of accounting periods in the asset’s useful life

14.  Know what "Book Value" and/or "Adjusted Basis" means and how calculated (Cost of the

assets less Accumulated Depreciation = Book Value

1. Book Value/Adjusted Basis = Total assets - total liabilities

2. Book Value and Adjusted Basis mean the same thing and are used interchangeably;

15.  Know the two methods to calculate bad debt expense (Aging of A/R which is a balance sheet method, and Percentage of Credit Sales which is an income statement method);

16.  You must know how to property record journal entries;

17.  The most common errors regarding JE's are writing an incorrect account (which occurs from not being able to properly identity types of accounts), writing JE's offsides (which occurs from improper indenting), and writing JE's backwards (which results from not being able to identify the normal balance of accounts and how each individual account is either increased or decreased);

18.  All accounts are increased on the normal balance side and decreased on the opposite

19.  You should know the four basic financial statements, Balance Sheet, Income Statement, Statement of Equity, and Statement of Cash Flow and what each financial statement represents and reports;

    1. Balance Sheet 

    2. Income Statement

    3. Statement of Equity

    4. Statement of Cash Flow

20. Balance Sheets are for a point in time, usually close of business at a FYE, quarter end, or month end, all other financial statements are for a period of time;

21.  You must be able to read a trial balance and knit together financial statements from such;

22.  Know that a Balance Sheet must show subtotals for Current Assets and Current

23. Liabilities (which is often referred to as a "Classified Balance Sheet");

24.  How Net Income is calculation (Revenue less Expenses),

25.  Know the difference between a Single-Step Income Statement and a Multi-Step Income

26.  Know how to calculate the Gross Profit percentage, and how to estimate ending inventory from pricing information, inventory, and purchase data;

27.  Know these abbreviations and be able to write out the words: COGAFS, COGS, GP

28.  Know how to calculate interest and/or maturity values using the formal P x R x T = 1 (Principal times rate expressed as an annual percentage times time equals interest);

29.  Understand sales of A/R to a Factor;

30. 32. Understand the impact of inventory errors;

31. 33. Know the four types of inventory cost flows (Specific Identification, Average Cost, FIFO &

32. 34. Know what FIFO and LIFO mean and effects thereof,

33. 35. Know when title transfers on inventory transactions;

34. 36. Know the difference between FOB Shipping Point & FOB Destination;

35. 37. E.g. in period of rising prices how does each method impact Gross Profit, Net Income, Income Tax Expense, and the financial statements themselves;

36. 38. Know the three types of inventory in a manufacturing enterprise, raw materials, work in progress, finished goods;

37. 39. Review the elements of a bank reconciliation;

38. 40. Know what Cash Equivalents are;

39. 41. Know what Goodwill is and how calculated:

40. 42. Know the difference and types of Fixed Assets (which are depreciated), Intangible Assets (which are amortized), and Natural Resources (which are depleted);

41. 43. Goodwill, a type of intangible asset is not amortized but is rather tested and measured for impairment;

42. 44. Know how to calculate Working Capital (current assets minus current liabilities);

43. 45. Know how to calculate the current ratio (currents assets divided by current liabilities), and how this information is presented;

44. 46. Know how to carve our and/or calculate sales tax from sales and A/R data;

45. 47. Understand Bond Discounts and Bond Premiums and what factors are involved;

46. 48. E.g. a Bond Discount arises when the contractual stated interest rate on a bond is lower than the market rate, and a Bond Premium arises when the stated interest rate on a bond is higher than the market rate;

47. 49. Know the differences and attributes of Common Stock, Preferred Stock, Treasury Stock and Additional Paid-in Capital (APIC);

48. 50. Know what Par Value means;

49. 51. Be able to write, in proper form, journal entries for any and all of the above items