Accounting Final

    Know the Accounting Equation and definitions for the elements thereof.

• Assets = Liabilities + Equity

  • Assets - “resources a company owns and controls”

    •  cash, supplies, equipment, land, accounts receivable

• Liabilities - “creditors claims on assets” (you owe others)

  •  wage payable,  notes payable, accounts payable, unearned revenue, accrued liabilities 

• Equity - the owner’s claims on assets 

  • Consists of dividends, revenue & expenses

    • + common stock, - dividends, + revenue, - expenses

2.     Know which types of accounts increase or decrease with debits or credits.

• Assets INCREASE with a DEBIT

  • DECREASES with a CREDIT

• Liabilities INCREASE with a CREDIT 

  • DECREASE with a DEBIT

• Equity INCREASE with  A CREDIT

  • DECREASE with a DEBIT

3.     Know the Accounting Cycle and the order of the steps therein.

1. Record transactions

2. Post each journal entries to specific accounts

3. Prepare trial balances

4. Note the end of the period adjustments

5. Create an adjusted trial balance

6. Prepare financial statements

7. Journalize and post closing entries

4.     Know the Journal Entry when the owner first contributes cash to his/her company.

5.     Know the difference between the Cash Basis and the Accrual Basis of accounting.

Accrual basis accounting

• records revenue when services and products are delivered and record expenses when incurred

Cash basis accounting

• records revenue when cash is received and records expenses when cash is paid 

6.     Know which accounting method is GAAP and that which gives rise to Adjusting Journal Entries.

7.     Know the different types of Adjusting Journal Entries.

8.     Know the difference between temporary accounts and permanent accounts for Closing Journal Entry purposes.

9.     Know the different Closing Journal Entries.

10.  Know the four different financial statements, their basic formats, and the order of preparation.

1. Income statement - describes a company’s revenue and expenses and computes net income  over a period of time.

   1. Revenue - expenses = net income

2. Statement of retained earnings - expresses the changes within retained earnings from net income over  a period of time

   1. Beginning retained earnings + net income - dividends = end. Retained

3. Balance sheet - describes a company’s financial position at a point in time

   1. Assets = liabilities + equity

4. Statement of cash flows

   1. Operating finances + Investing finances + Financing fiances  = change in cash

11.  Know w hat “contra” means and be able  properly name specific types of “contra” accounts.

12.  Know the word that means “to make an asset.”

13.  Know the purchasing transactions for Merchandise Inventory purchased.

14.  Know the definitions of and difference between the four types of inventory valuation methods.

15.  Know the difference between adjusting for Bad Debts when calculating using a % of Sales and a % of Accounts Receivable.

16.  Know the formula for calculating Accounts Receivable Turnover.

17.  Know the basis over which a lumpsum Fixed Asset purchase is allocated.

18.  Know the different depreciation methods, how to calculate each, and the differences between them.

19.  Know how to account for gains/losses on sales of assets.

20.  Know the different terms for allocating the cost of natural resources and intangible assets over their estimated useful lives.

21.  Know the order of and different categories of a company’s cash flows.

22.  Know at what value different types of stock are issued.

23.  Know why Preferred Stock is preferred.

24.  Know the mechanics of how to calculate the different types of cash flows in the Statement of Cash Flows.