exam 1 ent3451 Flashcards
(20 cards)
4 principles
- cost principle
- monetary unit assumption
- going concern assumption
- economic entity
cost principle
assets and services should be recorded at their actual cost
going concern assumption
assumption entity will remain in operation for foreseeable future
monetary unit assumption
items on financial statements are measured in monetary unit (US dollars)
A corporation…
is a separate taxable entity
assets
economic resource expected to benefit the business in the future
liability
debts owed to creditors
equity
the owner’s claims to the assets (assets-liabilities)
contributed capital
owner contributions to entity
common stock
the basic ownership of every corporation
revenues
earnings resulted from performing sevices
expenses
cost of performing services
dividends
distributions to stockholders
retained earnings
equity earned by profitable operations that is not distributed to stockholders
interest equation
interest= principle x interest rate x time
depreciation equation
straight-line depreciation= (cost - residual value) / useful life
income statement
revenues - expenses
statement of retained earnings
retained earnings + net income - dividends
balance sheet
assets vs. liabilities+ stockholder’s equity (common stock + retained earnings)
accounting process
- journal entry
- post to ledger t-account
- unadjusted trial balance
- income statement->statement of retained earnings->balance sheet
- adjustments
- depreciation
- accrued salaries
- accrued interest
