FIN ACCT 1

total amounts owed to creditors for loaning money to the company

Notes Payable

cash in advance from a customer for products or services to be provided in the future

Unearned Revenue

A liability

Unearned revenue is

Dividends, Net income and Beginning balance of retained earnings

What appears on the Stockholders' Equity?

Use the unadjusted trial balance to determine which accounts need to be adjusted, record adjustment in the journal, post to the T-accounts, prepare an adjusted trial balance

What are the steps of the adjustment process

Collection on accounts receivable

What is an operating activity? issue of stock, sale of equipment, payment of dividend, or collection on accounts receivable

Common stock + retained earnings (NI- dividends)

What is the Stockholders' Equity equation

Revenues Expenses

What will you find in the Income Statement?

Assets Liabilities Stockholders' Equity

What will you find on the Balance Sheet?

Liabilities, Stockholder equity, Common stock, Retained earnings, Revenues

Which accounts have credits as a normal balance?

Assets, expenses, dividends

Which accounts have debits as a normal balance?

sole proprietorship and partnership

Which business organization owners have unlimited liability?

Purchase of land

Which is an investing active on the statement of cash flows? purchase of land, purchase of supplies, payment of dividend or cash sale to customers

Assets & liabilities

A classified balance sheet shows subtotals for current ____ and current _____

Stockholders' equity, retained earnings, assets

A payment of cash dividend will decrease? Stockholders' equity, liability, asset, retained earning, net income

summary of the effects of all transactions related to a particular item over a period of time

Account

Assets = Liabilities + Stockholders' Equity

Accounting Equation

equation that shows a company's resources (assets) equal creditors' and owners' claims to those resources (liabilities and stockholders' equity)

Accounting Equation

Promise to pay cash in the future to creditors when purchasing supplies or materials

Accounts Payable

amounts the company expects to collect from customers based on the delivery of products and service

Accounts Receivable

record revenue when we earn them and record expenses with related expenses, regardless of when cash is received or paid

Accrual-basis Accounting

cumulative amount of depreciation expensed against a particular asset, such as a vehicle

Accumulated Depreciation

Credit Decreases

Accumulated Depreciation has a normal ___ balance which indicates that it ____ total assets

list of all accounts and their balances after we have updated account balances for adjusting entries

Adjusted Trial Balance

to record events that have occurred but that have not been recorded, such recording insurance expense at the end of the month from a prepaid policy

Adjusting Entries

liability

Amount owed to a creditor is classified on the balance sheet as a ...

resources owned by a company

Assets

trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company's financial statements

Auditors

financial statement that presents the financial position of the company on a particular date

Balance Sheet

historical cost of an asset, such as equipment, less the accumulated depreciation

Book Value

liquid assets owned by the company

Cash

record revenues at the time cash is received and expenses at the time cash is paid

Cash Basis Accounting

operating - investing + financing

Cash flow formula:

a list of all account names used to record transactions of a company

Chart of Accounts

entries that transfer balances of all temporary accounts (revenues, expenses, and dividends) to the balances of the retained earnings account

Closing Entries

amount shareholders have invested in the business

Common Stock

the process of allocating the cost of an asset, such as equipment, to expend over the useful life of an asset

Depreciation

cash payment to stockholders (owners)

Dividend

Balance sheet and Stockholders' equity

Ending retained earnings appears on

Identify the ethical issue and the stakeholders Specify the alternative course of action Evaluate the courses of a cation in terms of their impact on stakeholders Make a decision

Ethical decision making steps

the cost of providing products and services

Expenses

measure business activities of a company and communication of those measurements to external parties for decision-making purposes

Financial Accounting

periodic reports published by the company for the purpose of providing information (communicate) to external users

Financial Statements

all accounts used to record the company's transactions

General Ledger

the rules of financial accounting

Generally Accepted Accounting Principles (GAAP)

Increase liabilities and expenses

How do accrual adjustments affect liabilities and expenses?

Only temporary accounts are cleared out at the end of the accounting period

How do temporary accounts differ from permanent accounts?

Beginning RE + Net Income (rev - exp) - Dividends

How do you find Retained Earnings?

Retained earnings 1 + net income - x = Retained Earnings 2

How to find the dividends amount:

Its cash sales does not meet its cash needs

If a company reports a negative dollar amount under the statement of cash flows for operating activities, then...

Balance Sheet

If lenders were interested in knowing the amount of debt that a company has, where would they look?

Accounts payable

In other words, on accounts means

financial statement that reports the company's revenues and expenses over an interval of time

Income Statement

a chronological record of all transactions affecting a firm

Journal

amounts owed to creditors

Liabilities

recognizing expenses in the same period as the revenues they help generate

Matching Principal

Revenues - Expenses = NI

Net Income

the difference between revenues and expenses

Net Income

profit & revenues - expenses

Net Income is?

Increase

Net income has what effect on retained earnings?

the average time between purchasing or acquiring inventory and receiving cash proceeds from its sale

Operating Cycle

the balance sheet accounts where the balances are carried forward from period to period

Permanent Accounts

process of transferring the debit and credit information from the journal to individual accounts in the general ledger

Posting

costs of assets acquired in one period that will be expensed in a future period

Prepaid Expenses

provide a system of maintaining records of a company's operations communicate useful information to decision makers

Primary functions of accounting:

cumulative amount of net income earned over the life of the company that has not been distributed o stockholders as dividends

Retained Earnings

record revenue in the period in which we earn it

Revenue Recognition Principal

the amounts earned from selling products or services to customers

Revenues

Financing

Selling stock is what type of activity?

financial statement that measures activities involving cash receipts and cash payments over an interval of time

Statement of Cash Flows

financial statement that summarizes the changes in stockholders' equity over an interval of time

Statement of Stockholders' Equity

1. Identify accounts that are being affected 2. Identify the impact of the transaction on the accounting equation 3. Assess whether the transaction results in a debit or credit 4. Record 5. Post the transaction to the T-account in the General Ledger 6. Prepare a Trial Balance

Steps of External Transactions

Assets - Liabilities = SE

Stockholders' Equity

owners' claims to resources

Stockholders' Equity

revenues, expenses, and dividends are closed out at the end of each accounting period and transferred to Retained Earnings so that the new period begins with zero balance for these accounts

Temporary Accounts

Ethics

Term that refers to a code or moral system that provides criteria for evaluating right from wrong

retained earnings

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as

Investing, Operating, Financing

Three types of business activities of a company?

a list of all accounts and their balances at a particular date, showing the total debits and credits

Trial Balance