Comprehensive Guide to Accounting Principles and Concepts
1.
Accounting
Is the information system that measures business activities, processes the
Information into reports, and communicates the results to decision makers.
Managerial Accounting provides information to internal decision makers
Financial Accounting provides information to external decision makers
The SEC is a US government agency that oversees the U.S. Financial markets
5.The
Financial Accounting
Standards Board (FASB) is a private organization that
Oversees the creation and governance of accounting standards in the U.S.
Generally Accepted Accounting Principles are the main U.S. Accounting rulebook and are Made by FASB
7.The Economic Entity assumption states that an organization stands apart as a Separate economic unit from its owners.
The Cost Principle states that acquired assets should be recorded at actual cost
The Going Concern assumption assumes that the entity will remain in operation for The foreseeable future
10.The Monetary Unit assumptions requires the items on the financial statements to be Measured in terms of a monetary unit.
11.The
International Accounting Standards
Board (IASB) is a private organization that
Oversees the creation and governance of International Financial Reporting
Standards (IFRS).
12.Sarbanes-Oxley Act (SOX) requires companies to review internal; control and take Responsibility for the accuracy and completeness of their financial reports.
The Best definition of Assets is resources belonging to a company that have future Benefit to the company
14.Accounts Receivable is an asset that is a promise to pay from customers for goods and Services that they received from a company.
A Liability is an obligation that a company owes to an outside person or agency
Accounts Payable is a short-term liability where the company owes money to its Creditors
The Accounting equation is:Assets = Liabilities + Owner’s Equity
18.The Purchase of an asset for cash leaves total assets unchanged because it Increases one asset (the asset purchased) and decreases another (cash).
19.An owner’s withdrawal of cash decreases assets and owner’s equity because it Decreases the cash asset and decreases owner’s equity.
Assets And expenses normally have a debit balance
The Cash account is increased by debits and decreased by credits
22.When A business makes a cash payment for an expense, an asset (Cash) is credited and An expense account is debited.
23.The Balance
Sheet is the financial statement that is concerned with the business at a specific point in time.(pg 19)
24.The income Statement and Statement of
Owner’s Equity are financial statements that are concerned with the
Business over a period of time such as a
Month or a year.
The Income Statement: Revenue – Expenses = Net Income or Net Loss.(pg 17)
26.A Journal entry includes the date of the transaction, the titles of the accounts Debited and credited, and the dollar amount(s) debited and the dollar amount(s) Credited.
The Process of transferring journal entry information from the journal to the Ledger is called posting
The Correct sequence of accounting procedures is journal, ledger, trial balance, Financial statements
Typically, The chart of accounts begins with Asset accounts
A Person who wants to determine the balance of a particular account should refer To the General Ledger.(pg 57)
31.The Time Period Concept assumes that a
Business’s activities can be sliced into small segments and that financial
Statements can be prepared for specific periods, such as a month or year.
The Revenue Recognition Principle requires companies to record revenue when it has Been earned
33.The Matching Principle requires that all expenses be recorded when they are Incurred during the time period and matches those expenses against the revenue Of the same time period.
34
When preparing financial statements, the Income Statement must be prepared first, the Statement of Owner’s equity Second, and the Balance sheet third.(pg 182)
The Amount of net income on the Income Statement is transferred to the Statement of Owner’s Equity
A Company that receives money in advance of performing a service debits cash and Credits unearned revenue
Unearned Revenue is a liability account
A Prepaid expense is an expense that the business has paid, but not yet incurred
Prepaid Expenses are asset accounts
Prepaid Expenses expire and become expenses as they are incurred
Adjusting Entries record either expenses or revenue
Resources And Expenses are the only two types of accounts on the Income Statement
43
Adjusting entries never involve the Cash Account.(pg 133)
Adjusting Entries are made primarily to conform to the matching principle
45
Adjusting entries are needed to correctly Measure the net income (loss) on the Income Statement
(pg
121)
Depreciation Spreads the allocation of a plant asset’s cost over its useful life
Depreciation Expense records a plant asset’s decline in value over its useful life
Accumulated Depreciation is a contra-account
Accumulated Depreciation is the sum of all the depreciation expense recorded to date for a Plant asset
50.The Adjusting entry for depreciation would include a debit to Depreciation expense And a credit to Accumulated Depreciation.
51.A
Current asset is expected to be converted to cash, sold, or used during the
Next twelve months or within the business’s normal operating cycle if the cycle
Is longer than a year.Cash, accounts
Receivable, supplies, and prepaid expenses are examples of current assets. (pg
185)
Revenue, Expenses, and withdrawals are temporary accounts that are closed at the end of Each financial year
The Only temporary accounts are revenue, expenses, and withdrawals
Revenue And expenses are closed to the Income Summary account
55.During Closing, revenue is credited to the Income Summary account and expenses are Debited to the income summary account.
The Balance of the Income Summary account reflects net income (credit balance) or Net loss (debit balance)
The Income Summary account is closed to the Owner Capital account
Withdrawals Are closed to the Owner Capital account
59.Revenues, Expenses, and withdrawals do not appear on a post-closing trial balance (because they have been closed.)
1.Accounting Is the information system that measures business activities, processes the Information into reports, and communicates the results to decision makers.
Managerial Accounting provides information to internal decision makers
Financial Accounting provides information to external decision makers
The SEC is a US government agency that oversees the U.S. Financial markets
5.The Financial Accounting Standards Board (FASB) is a private organization that Oversees the creation and governance of accounting standards in the U.S.
Generally Accepted Accounting Principles are the main U.S. Accounting rulebook and are Made by FASB
7.The Economic Entity assumption states that an organization stands apart as a Separate economic unit from its owners.
The Cost Principle states that acquired assets should be recorded at actual cost
The Going Concern assumption assumes that the entity will remain in operation for The foreseeable future
10.The Monetary Unit assumptions requires the items on the financial statements to be Measured in terms of a monetary unit.
11.The International Accounting Standards Board (IASB) is a private organization that Oversees the creation and governance of International Financial Reporting Standards (IFRS).
12.Sarbanes-Oxley Act (SOX) requires companies to review internal; control and take Responsibility for the accuracy and completeness of their financial reports.
The Best definition of Assets is resources belonging to a company that have future Benefit to the company
14.Accounts Receivable is an asset that is a promise to pay from customers for goods and Services that they received from a company.
A Liability is an obligation that a company owes to an outside person or agency
Accounts Payable is a short-term liability where the company owes money to its Creditors
The Accounting equation is:Assets = Liabilities + Owner’s Equity
18.The Purchase of an asset for cash leaves total assets unchanged because it Increases one asset (the asset purchased) and decreases another (cash).
19.An Owner’s withdrawal of cash decreases assets and owner’s equity because it Decreases the cash asset and decreases owner’s equity.