Accounting Principles
Financial Info is capable of making a difference in a decision
What is Relevance
Companies only include transaction data that can be expressed in money terms.
What is Monitory Unit Assumption
Debits must equal credits
Double Entry System
cash inflows and outflows (receipts and payments)
What is Statement of Cash Flows
I.A.S.B. accounting commission
What is International Accounting Standards Board
Securities and Exchange Commission, Financial Accounting Standards Board and Generally Accepted Accounting Principles
What is S.E.C., F.A.S.B and G.A.A.P.
Activities of the entity must be kept separate from the activities of the owner and all other economic entities.
What is Economic Entity Assumption
Assets, Dividends, Expenses, Accounts Receivable
What is Normal Balance for Debits
Revenues and expenses shown as Net Income or Loss
What is Income Statement
what two accounts are considered temporary
What is Revenues/Expenses
What is Faithful Representation
Accountants divide the economic life of a business into artificial time periods.
What is Time Period Assumption (also Periodicity Assumption)
Liabilities, Common Stock, Revenue, Accounts Payable
What is Normal Balance for Credits
Total Assets equalling Total Liabilities + Stockholders Equity
What is Balance Sheet
Revenues are recorded when cash is received. Expenses are recorded when cash is paid. Not in accordance with GAAP.
What is Cash Based Accounting
What is Historical Cost
Recognize revenue in the accounting period in which the performance obligation is satisfied
What is Revenue Recognition Principle
Owner invests 30,000 cash to start a company
What is Debit cash 30,000, Credit Owners capital (equity or investment works too) 30,000.
Beginning owners equity, net income and dividends shown as retained earning AKA end. owners equity
What is Retained Earnings Statement
Companies recognize revenues when they perform services and expenses when they are incurred
What is Accural Accounting
Products price fluctuates, value increases/decreases over time. Affected products must be booked at flux price. Used for investments.
What is Fair Value
Match the Expenses with revenues in the period when the company makes efforts to generate those revenues.
Expense recognition principle
Company is paid 10,000 for gardening services that are to be carried out in 2 weeks
What is Debit cash 10,000, Credit Unearned Revenue 10,000.
The only financial statement recorded for a point in time and NOT a period of time
What is the Balance Sheet
The correct order of accounts in a Trial Balance
What is, Assets: Cash, supplies, equipment, accounts receivable
Liabilities: notes payable, accounts payable
Stockholders equity: Common Stock, revenue, expenses, dividends.