Accounting Exam 1 Study Guide – Flashcards
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Accounting cycle step 1
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Analyze business transactions
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Accounting cycle step 2
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Journalize transactions
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Accounting cycle step 3
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Post to ledger accounts
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Accounting cycle step 4
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Prepare a trial balance
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Accounting cycle step 5
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Journalize and post adjusting entries: Prepayments/Accurals
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Accounting cycle step 6
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Prepare an adjusted trial balance
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Accounting cycle step 7
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Prepare financial statements: income statement retained earnings statement balance sheet
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Accounting cycle step 8
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Journalize and post closing entries
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Accounting cycle step 9
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Prepare a postclosing trial balance
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Differences between Internal and External users of accounting
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The information that a user of financial information needs depends on the kinds of decisions the user makes. The differences in the decisions divide the users of financial information into these two groups.
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Examples of internal users of accounting
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Managers who plan, organize, and run a business: food service managers, housekeeping, supervisors, rooms division managers, and others.
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Examples of external users of accounting
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Investors, creditors, taxing authorities, and regulatory agencies.
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Ethics
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The standards of conduct by which one's actions are judged as right or wrong, honest or dishonest, fair or not fair.
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What does SEC stand for
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Securities and exchange commission
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What are SEC's responsibilities in the accounting world
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Governmental agency that requires companies to file financial reports following generally accepted accounting principles.
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What does FASB stand for
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Financial accounting standards board
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What are FASB's responsibilities in the accounting world
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Private organization established broad reporting standards of general applicability as well as specific accounting rules.
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Assets
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Resources owned by a business
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liabilities
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Claims against assets/ existing debts or obligations
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Owners Equity
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The owners claim on total assets. It is equal to total assets minus total liabilities.
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The four uniform system of accounts and what they are used for.
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Lodging, food service, club and gaming industries. Procedures and guidelines for the various segments to ensure compatibility, accountability, and meaningful usage of accounting data.
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Accounting Employees found at a hotel
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Director of finance, assistant to the director of finance, credit manager, director of IT, and director of purchasing.
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Difference between clubs and food service/ restaurants
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Clubs have a unique category of revenue called membership dues.
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The FASB's Conceptual framework components
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1. Objectives of financial reporting 2. Qualitative characteristics of accounting information 3. Elements of financial statements 4. Operating guidelines (assumptions, principales, and constraints)
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Objectives of financial reporting
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1. The information is useful to those making investment and credit decisions 2. The financial reports are helpful in assessing future cash flows 3. The economic resources (assets), the claims to those resources (liabilities), and the changes in those resources and claims are clearly identified
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Qualitative characteristics of accounting information
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relevance, reliability, comparability, and consistency
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Monetary unit assumption
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states that only transaction data that can be expressed in terms of money should be included in the accounting records.
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Economic entity assumption
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states that the activities of the entity should be kept separate and distinct from the activities of the owners and of all other economic entities.
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Time period assumption
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states that the economic life of a business can be divided into artificial time periods.
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Going concern assumption
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assumes that the enterprise will continue in operation long enough to carry out its existing objectives.
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Revenue recognition principle
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dictates that revenue should be recognized in the accounting period in which it is earned.
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Matching principle (expense recognition)
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expenses match revenue
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Full disclosure principle
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requires that circumstances and events that make a difference to financial statement users be disclosed.
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Cost principle
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dictates that assets be recorded at their cost.
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IFRS
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International Financial Reporting Standards
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IASB
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International Accounting Standards Board
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Income statement
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presents the revenues and expenses and resulting net income or net loss for a company for a specific period of time.
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Retained earnings statement
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summarizes the charges in retained earnings for a specific period of time
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Balance sheet
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reports the assets, liabilities, and stockholders equity of a business enterprise at a specific date
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Statement of cash flows
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summarizes information concerning the cash in flows (receipts) and outflows (payments) for a specific period of time
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Debits
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Left
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Credits
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Right
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Double entry accounting
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The equality of debits and credits.
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The recording process
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1. Analyze each transaction for its effects on the accounts 2. Enter the transaction information in a journal 3. Transfer the journal information to the appropriate accounts in the ledger
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General journal
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Transactions are recorded
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General ledger
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Accounts maintained by a company. contains all assets, liabilities, and stockholders equity accounts.
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Chart of accounts
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lists the accounts and account numbers that identify their location in the ledger.
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Trial balance
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List of accounts and their balances at a given time. To prove that debits are equal to credits.
