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Accounting > Mid Term 1 > Flashcards

Mid Term 1 Flashcards

1
Q

Bank reconciliation

Bank side

A

Beginning Balance
+ deposits outstanding
- checks outstanding

+/- Bank Error

Ending Balance

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2
Q

Bank reconciliation

Company side

A 
Beginning Balance
\+ collections note 
\+ interest 
- ETF 
- NSF
- Debit card
- Bank Service Fee 
\+/- error 
Ending Balance
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3
Q

DEAD CURLS

A

Debit increase
Expense
Assets
Dividends

Credit increase
Unearned revenue (deferred) 
Revenue 
Liabilities 
Stock Holders Equity
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4
Q

Primary purpose of bank reconciliation

A

Ensure the bank balance per reconciliation equals to the company balance per reconciliation

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5
Q

Ending retained earnings =

A

ERE= BRE + Net income - dividends

Therefore

Change in RE = Net income - dividends

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6
Q

Basic accounting equation

A

Asset = Liabilities + Stockholder Equity

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7
Q

Stock holder Equity =

A

Retained earnings + Contributed capital (common stock)

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8
Q

Net income =

A

Revenue - expenses

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9
Q

Adjusting entries rules

A

They don’t deal with cash

They at least have

  • 1 income statement item
  • 1 balance sheet item
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10
Q

What is the revenue recognition principle

A

The time you would book revenue

2 rules:

  • when service is provided
  • when we believe we will be paid
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11
Q

Two types of accounting

A

Financial accounting

Managerial accounting

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12
Q

Financial accounting

A

Accounting Designed for decisions makers outside of the company

Outside

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13
Q

Managerial Accounting

A

Accounting designed primarily for decision makers within the company

Within

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14
Q

Sole propitiatorship

A

Business owned by one

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15
Q

Partnership

A

Business owned by two or more people

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16
Q

Corporation

A

Business is legally separated from its owners

Limited liability of stockholder

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17
Q

Four fundamental activities of for profit firms

A

Establish goals and strategies
Obtain financing
Make investments
Conduct operation

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18
Q

Two ways to obtain financing

A

Debit financing from creditors (liabilities)

Equity financing from owners (stockholder equity)

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19
Q

Short term asset

A

Resources used quickly

Inventory

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20
Q

Long term asset

A

Resources used for over long periods of time

Equipment

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21
Q

Business activities

FIO

A

Financing (investors or creditors)

Investing (purchasing things for company)

Operating

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22
Q

Accounting system

A

The process by economic data are gathered, tabulated, summarized, and communicated by way of financial statements

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23
Q

Accounting cycle

A

Specific steps in construction financial statement

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24
Q

What kind of financial statement reports at point in time

A

Balance sheet

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25
Q

What kind of financial statement reports at period of time

A

Statement of cash flows

Statement of stock holders equity

Income statement

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26
Q

Element of high quality financial info

A

High quality accounting standards
-GAAP (generally accept acct principles)

High quality auditing standards

  • PCAOB (public company accounting oversight board)
  • public traded company must be audit other companies elect to be audited

Regulatory oversight or monitoring
- SEC (securities and exchange) monitor public company

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27
Q

Characteristic of high quality financial info

A

Relevant

Representational

Comparable

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28
Q

Use accounting info to asses

A

Profitable
Operation efficiency
Liquidity
Value creation

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29
Q

Return on equity (ROE) =

A

Net income/ owners equity

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30
Q

Return on assets =

A

Net income/ total assets

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31
Q

Gross margin =

A

(Sales-cost of goods sold) / sales

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32
Q

Profit margin =

A

Net income / Sales

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33
Q

Income statement

A

Revenues - expenses = net income

If negative net loss

If pos net gain

34
Q

Balance sheet

A

Financial position:

Resources = Liabilities and stockholder Equity

35
Q

Statement of stockholders equity

A

Common stock
- external source

Retained earning
- internal sources

36
Q

Statement of cash flows

A

Operating cash flow (rev and exp)

Investing cash flow (purchase)

Financing cash flows (lenders and stockholders)

37
Q

Assets

A

Resources owned

38
Q

Liabilities

A

Amounts owed

39
Q

Stockholder Equity

A

Owners claim to resources

40
Q

Dividends

A

Distribution to stockholders

41
Q

Revenue

A

Amount earned from sales of product or services

42
Q

Expenses

A

Cost of selling product or services

Operating

43
Q

Common stock is a what

A

Stock holder equity account

Sell stock to investors

44
Q

Cash is a what

A

Asset

45
Q

Salaries payable is a

A

Liability

46
Q

Service rev is a

A

Revenue

47
Q

Utilities expenses is a

A

Expenses

48
Q

Supplies is a

A

Asset

49
Q

Advertising expense is

A

Expense

50
Q

Building is a

A

Asset

51
Q

Account payable is a

A

Liability

52
Q

Divendens is a

A

Stockholder Equity or dividend

53
Q

Expenses and revenues are located in what sheet

A

Income statements

54
Q

Balance sheets have what

A

Accounts payable
Common stock
Accounts receivable
Retained earning

55
Q

Temporary accounts
RED IS DEAD (you close the accounts after adjusting, so you zero out)

Permenant account is retained earning

A

Revenue
Expenses
Dividend

56
Q

Accrual accounting

A

Recognize revenue when it is earned

Recognize expenses when they are incurred

57
Q

When working with interest and time use? When adjusting

A

PRT

principle (starting) x rate x time (x/12)

58
Q

Everything must what

A

BALANCE

59
Q

To find change in cash flows

A

Change Op (operating cash)
+
Change investing (money we get on property plant equipment)
+
Change finance (contributed capital and loans )

60
Q

What does PPE mean

A

Property
Plant
Equipment

61
Q

What does this mean when you have ( number )

A

Negative number

62
Q

Reason for incorrect financial statement

A

Error (most common)

Fraud

63
Q

Reasons for fraud

OMR

A

Opertunity

Motivation

Rationalization

64
Q

SOX act of 2002

Established internal controls and auditor client relations

A 
Oversight board
Cooperate exec accountability 
Non audit service
Retention of paper
Auditor rotate
Conflicts of interest 
Hiring of auditor 
Internal control 
(Only on public companies)
65
Q

Oversight board

A

PCAOB (public company acct oversight board)established

66
Q

Corporate exec accountability

A

Corporate exec accountable for business

67
Q

Non audit service

A

Against law for auditor to perform non audit services for company

68
Q

Retention of papers

A

Gotta keep papers for 7 years

69
Q

Auditors rotation

A

Lead auditor must change every so often (every 5 year)

70
Q

Hiring auditors

A

Cannot he hired by company must be hired by board of directors

71
Q

Internal control

A

Ceo and cfo certify internal control

Manager and auditor attest to effectiveness of internal control and reveals material weakness in internal control

72
Q

Components of internal control

Pyramid

A

Monitoring
Control activities
Risk assessment
Control environment (most important)

73
Q

Elements of internal control (get controlled environment)

HES DIP

A

Human resource control
Establishment of responsibilities
Segregation of duties

Documentation of procedures
Independent internal verification
Physical controls

74
Q

Establishment of responsibility’s

A

Make people responsible
One person is responsible for one thing
Be authorized for certain things

75
Q

Segregation of duties

A

Different people responsible for different things

76
Q

Documentation procedure

A

Prenumber documents

- all accounted for

77
Q

Physical controls

A 
Alarms 
Safes
Monitors
Camera
Password etc
78
Q

Independent internal verification

A

Founding principle

  • records periodically verified by an independent employee to see difference
  • look for discrepancy
79
Q

Human resource

A

Bond employees
Rotate employees on duty (give vacations )
Conduct background check

80
Q

Detective controls

A

Reconciliations - make accounts record see if same
Performance reviews
Audits

Things you don’t see

81
Q

Petty cash

A

Small amount of cash kept on hand to pay minor purchase (expenses)

Accounting (2 decks)

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