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Intro. To Accounting and Business Test: chapters1-3

Managerial accounting
The area of accounting concerned with providing internal users with information
Supplier
User which is NOT considered an internal user of accounting information
Manager
User which is NOT considered an external user of accounting information
Business entity concept is important because
It limits economic data in the accounting system to data directly related to the activities of the business.
False statement about GAAP
GAAP allows a company’s management to record and report data as it sees fit.
FASB
Financial accounting standards board that primarily developes the accounting principles in the United States.
Cost concept
Accounting records will show assets recorded at the exchange price or cost.
Liabilities
Rights of creditors
Assets
Resources owned by the business
Stockholder’s equity
Rights of owners
Paying amount on account reduces
The amount owed on a liability
Balance sheet
Includes assets, liabilities, and stockholder’s equity
Balance sheet
Used to record the financial position based on the accounting equation. Assets =liabilities – stockholder’s equity
Income statement
Summary of the revenue in a month or year
Corporations refer to Total owner’s equity as
Total stockholder’s equity
Account that never requires adjusting entry
Cash
Accrued revenues
Have been earned but have not been received or recorded in the books
Cash basis of accounting (true statement)
Revenues are reported in the period in which cash is received, and expenses are reported when cash is paid out
Prepaid expenses
An advance payment of cash
Adjusting entry for accrued revenues
Is the same journal entry as recording revenue on account.
When recording an adjusting entry for unearned revenues
A revenue account is debited
The adjusted trial balance is prepared
After adjusting entries are posted but before financial statements are prepared
After the adjusted trial balance is balanced, it can be used to prepare
The income statement, retained earnings statement, and classified balance sheet
If the adjustment for prepaid insurance was omitted
The adjusted trial balance would not be unequal.
Transaction that doesn’t affect stockholder’s equity
A sale on account

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