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