acct 201 final Flashcards by max gruis

what are the 4 basic principles for the house of GAAP

Historical cost principle, Expense recognition Principle, Revenue Recognition Principle, Objectivity Principle.

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What are the 4 basic assumptions for the house of GAAP

Time period assumption, Monetary unit assumption, Going Concern assumption, Business entity Assumption

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Amounts are initially recorded in the accounting records at their cost or purchase price

Historical Cost principle

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Expenses are reported in the same period as the revenue that those expenses are generated.

Expense Recognition Principle

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Revenue is recorded in the accounting records in the period in which it is earned

Revenue Recognition Principle

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Amounts recorded in the accounting records must be based on objective evidence often called source documents.

Objectivity Principle

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A company can divide its economic activities into artificial time periods, the most common are monthly, quarterly, and yearly

Time period Assumption

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Money is the common denominator of the economic activity and provides an appropriate basis of measurement for reporting financial data

Monetary unit assumption

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The assumption that the company will have a long life and remain in business long enough to accomplish the purposes for which it was founded

Going Concern Assumption

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A business keeps its activity separate from its owners and any other business unit

Business entity assumption

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What is the expanded accounting equation

Assets = Liabilities + Owners equity - Drawing + Revenues - Expenses

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What are the three “flavors” of accounting and what they are used for

Financial Acct. - external sources
Managerial Acct.- internal sources
Tax Acct.- IRS/Gov’t

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What are the 4 functions of Acct. and what do they stand for (IMRC)

I- Identify/ what happened
M- Measure/ how much
R- Record/ where
C- Communicate/ which

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What are the 3 R’s

Relevant Reliable CompaRable

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What is the book of original entry called

Journal

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A list of all accounts used by a business and the identifying numbers for each account is referred to

Chart of accounts

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what are the 3 essential parts of a T- account

Type, title, DR/CR

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What source documents support wage expense

Employee earnings record/time cards

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what source docs support the amount of “Sales Revenue” reported by an online seller

purchase orders + sales ticket/receipt

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What is on the chart of accounts

Acct. name and number

not balance

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What is normal balance and which accounts are on each side

Side on which an increase happens
Asset(L) Drawing(L) Expense(L) DEBIT
Liability(R) Capital(R) Revenue(R) CREDIT

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What does Triple A and Triple T stand for

Triple A = Account Amount Action
Triple T= Time Type Tale

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what is the depreciation equation

cost- salvage value / Estimated Useful Life

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What are capital Expenditures

They add/improve a current asset

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What are revenue expenditures

they maintain a current asset

What is the percentage of sales method and the journal entry to go with it

1 step process Amount of credit sales x estimate of ADA DR: bad debt exp CR: A.D.A (C-A)

What is the percentage of Receivables method and the journal entry for it

amount at year end x estimated bad debt then consider any A.D.A

What are the 5 steps of the accounting cycle

1. Business transaction 2. journal entry 3. General ledger4. Trial balance 5. Financial Statements

What is the difference between a general ledger and subsidiary ledger

General ledger is a listing of all accounts used and their balances subsidiary ledger is supplementary listing showing a separate account for each customer

What is it called when a business sells things but it expects some customers won't pay

Uncollectible Accounts/ Bad Debts

What is the direct write off method

it only incurs bad debt expense once it happens it also doesn't estimate any bad debt

What is the allowance method

It records bad debt expense in current period and uses estimates of how much they think they won't collect

What are the 2 methods allowed by GAAP for estimating uncollectible amounts

Percentage of Sales and Percentage of Receivables

What is the Abbreviation of COSO stand for

Committee of Sonsoring Organizations

What is the Fraud Triangle

Opportunity, rationalization, and pressure

viruses ATTACHED to E-mails and websites monitor keystrokes: when you sign on to financial websites, it steals your passwords

Pharming

hackers SEND emails to you posing as banks: you are asked for information using fake websites where they steal your passwords and personal data

Phishing

Cybercrooks SET up wireless networks hoping you will use them to connect to the web: passwords and data are stolen if you connect

Wi-phishing

Hackers send out spam and viruses from your PC

Bot-Networking

Hackers set up websites with addresses similar to legit businesses: when you make a typo and hit their sites they infect your PC

Typo-Squatting

What is the journal entry made by a merchant that sells goods and accepts a check as payment from the customer

DR: cash CR: Sales DR: COGS CR: Merch Inv

How is a bank reconciliation set up

LEFT Right Per Bank Per Books +ADD +ADD -Deductions -deductions =CCB =CCB

What is a perpetual accounting system

A system that updates after every sale

What is a periodic accounting system

A system that is updated at the end of the period

What does a sales journal entry look like

DR: COGS CR:Inv

What does a purchase journal entry look like

DR: Inv CR: A/P or cash if not on ACCT.

what does FIFO mean

FIrst in First out

what is LIFO

Last in First out

In a period of rising prices, the inventory method which tends to give the highest reported ENDING inventory is

FIFO

In a period of rising prices, the inventory method which tends t ogive the highest reported COST OF GOODS SOLD is

LIFO

In a period of FALLING prices, the inventory method which tends t ogive the highest reported net income is

LIFO

FOB destination=

The SELLER pays for transport

FOB Shipping point=

The BUYER pays for transport

Which part issues a debit memo

The Buyer

how are trade discounts reported in the buyer's accounting records

Not Reported TD's are invisible to the accounting records

Beginning Inv + Purchases=

Goods available for sale

Sales-COGS=

Gross Profit

What is the expanded income statement

Sales -Sales discount -Sales returns -Sales allowance = Net Sales -COGS =Gross profit -Operating Expenses Selling Expenses General Expenses Administrative Expenses = Income form Operations + other Rev & Gains - Other Exp & Losses =Net income

how are purchase discounts set up Ex. 2/10,n/30

2= Discount % 10= number of days before discount expires n= If not paid NET due in 30 days 30= credit period/ when payment is due

what is the expanded accounting cycle

1= business transaction 2= Journal entry 3= post to general ledger 4= unadjusted TB 5= Adjusting Process 6= post-adjusting TB 7= Financial Statement 8= closing process 9= post closing TB

what are the 3 permanent accounts that are not closed

asset liability and capital

what are the temporary accounts that are closed

revenue expenses drawing

what is the 4 step closing process

close revenue accounts Income Summary close expense accounts to IS Close Income Summary to owners capital Close Withdrawals Account to owners capital

what does a closing process journal entry look like

DR: Fee earned CR: I/S DR:I/S CR: Expense account DR:I/S CR:Owner cap. DR: Owner cap. CR:Drawing

what is the cash basis of acct.

what is the accrual basis of acct.

Rgister expenses when INCURRED and revenues when EARNED when thing is used/consumed or when job is done

what is the 3 step process for adjusting entries

"is" "Should be" "Adjust"

what is the international counterpart to GAAP

IASB or IFRS