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Accounting ch. 1, 2, 3

ownership of a corporation is divided into units called shares or stock T/F
according to the cost principle, it is preferable for managers to report the most current estimate of an asset’s value T/F
the balance sheet shows whether or not the firm achieved its primary objective of earning a profit T/F
false, it shows what you owe
fees earned, but yet not received in cash, by a business in exchange for services that it has provided appear on which of the following statements?
income statement
the primary objective of financial accounting is
to provide financial statements to help external users analyze and interpret and organization’s activities
definition: a system that identifies, records, communicates information that is relevant, reliable, comparable about organizations business
external or internal: lenders, shareholders, customers, gov’t, external auditors, consumer groups
external or internal: managers, officers, internal audits, sales stuff, budget officers, controllers
definition: governed by concepts and rules
financial accounting
general accepted accounting principles
business entity form:
sale proprietorship, partnership, corporation
Oxley Act help curb financial abuses at companies that issue their stock to the public
Accounting Equation
expenses decreases what?
definition: the difference between revenues and expenses
net income
definition: describes a company’s revenues and expenses along with the resulting net
income statement
definition: describes a company’s financial position at a point in time
balance sheet
return on assets
equation of ROA
return on assets= net income/average total assets
source document
sales ticket, bank statement, invoice from supplier, checks, purchase orders, bills from suppliers, employee earnings records
definition: a record containing all accounts used by a company
general ledger
definition: accounts is a list of all accounts a company uses
definition: occur between the organization and an outside party
external transactions
definition: a record of increases, decreases in a specific asset, liability, equity, revenue or expense item
definition: represents a ledger account and is a tool used to understand the effects of one or more transactions
definition: an account balance is the difference between the increases/decreases in an account
double entry accounting
used in practice and give a running total
balance column account
makes sure that the debits and credits equal
trial balance
definition: revenues are recognized when earned and expenses are recognized when incurred
accural basis
definition: recognizes revenues when cash is received and records expenses when cash is paid
cash basis
definition: is recorded to bring an asset or liability account balance to its proper amount as well as update any related revenue or expense account
adjusting entry
definition: the process of allocating the costs of plant assets over their expected useful lives
definition: acclimated depreciation is a
contra account
temporary accounts accumulate date realted to one accounting period
income statements
when closing: close rev as credit or debit
when closing: close expense as credit or debit
when closing: close income summary to retained earning credit or debit
when closing: dividend account is closed to?
retained earnings
determine the ending blanche in retained earnings as a debit or credit
should debit and credit equal in a trial balance
unearned revenue is a liability or equity

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