GAAPS
The widely used principle of accounting for assets at their original price to the current owner.
cost principle
(historical cost concept)
A financial statement summarizing the results of operations of a business by matching its revenue and related expenses for a particular accounting period. Shows the net income or net loss.
Income Statement
Economic resources owned by an entity.
assets
What accounts are affected? Increased or decreased? Amount?
Sold capital stock to owners for $20,000
Cash increased $30,000
Capital Stock $30,000
Why don’t skunks have to pay taxes?
Because they only have one scent.
An economic unit that controls resources, incurs obligations, and engages in business activities.
business entity
The financial statement showing the position of an enterprise by summarizing its assets, liabilities, and owners’ equity at a point in time. Also called the balance sheet.
statement of financial position
A person or organization to whom debt is owed.
creditor
What accounts are affected? Increased or decreased? Amount?
Purchased Land for $350,000. Signed a note for $300,000 and paid the remainder in cash.
Land increase $350,000, Cash decrease $50,000
Notes Payable increase $300,000.
Why did the IRS audit the chiropractor?
He owed back taxes.
An assumption by accountants that a business will operate in the foreseeable future unless specific evidence suggests that this is not a reasonable assumption.
going-concern assumption
An activity statement that explains the enterprise’s change in cash in terms of its operating, investing, and financing activities.
statement of cash flows
An increase in the general price level, resulting in a decline in the purchasing power of the monetary unit.
inflation
What accounts are affected? Increased or decreased? Amount?
The Business received $600 from Ace Towing as partial settlement of its customer's account.
Cash increase $600
Accounts Receivable decrease $600
Where is the place to negotiate with the IRS?
At the tax table.
An assumption by accountants that the monetary unit used in the preparation of financial statements is stable over time or changes at a sufficiently slow rate that the resulting impact on financial statements does not distort the information.
stable-dollar assumption
That portion of stockholders’ (owners’) equity resulting from profits earned and added to the business.
retained earnings
A declaration of information believed to be true and communicated in monetary terms.
financial statement
What accounts are affected? Increased or decreased? Amount?
Put a bid on some land 120,000. The land was appraised for 130,000 and they paid 125,000 in full.
Land increase $125,000
Cash decreases $125,000
How did the CPA break her leg?
She lost her balance.
Revenue is recorded at the time goods or services are sold. A business may sell goods or services or both. Cash may be received at the time of sale, or the business may agree to receive payment at a later date. Regardless of when cash is actually received, the sale amount is recorded in the accounting records at the time of sale.
Realization of Revenue
OR
Revenue Recognition
The owners’ equity of an enterprise organized as a corporation.
stockholders’ equity
Measures taken by management specifically intended to make a business look as strong as possible in its balance sheet, income statement, and statement of cash flows.
window dressing
For a sole proprietorship....
Owner invests cash $10,000, furniture $2,000 into his business,
Cash increase $10,000, Furniture increase $2,000, Capital increase $12,000
What accounting word has three consecutive double letters?
Bookkeeper OR Bookkeeping