Term
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Definition
| Private sector (Organizations that use internal auditing staff), Public sector (Mostly governmental agencies) and Public accounting firms (Independant workers who can make reports for different businesses) |
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Term
| Process of Accounting (4) |
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Definition
| Recording, classifying, reporting and then interpreting |
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Term
| Difference between managerial and financial accounting |
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Definition
| Financial accounting is the preparation of financial reports for use by persons outside of the firm. Managerial reports are prepared for use by managers of the firm. |
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Term
| Primary Financial Report (6) |
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Definition
| Income Statement, Balance Sheet, Statement of Equity (or Retained Earnings) and Cash Flow Statement. Two other statements included are the Footnotes and the Auditor's Report. |
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Term
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Definition
| For every debit there must be an equal credit value and vice versa. |
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Term
| Cash Flow Statement sources (3) and uses (3) |
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Definition
Sources - operations (revenue from selling goods minus expenses), investing (selling long term assets), financing (long term borrowing)
Uses - operations (if cash expense > revenue), investing (buying long term assets), financing (retiring debt or paying off shares) |
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Term
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Definition
| Auditors who are not employees assess how fair the financial reports are. |
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Term
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Definition
| Each business venture is a seperate unit, accounted for seperately |
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Term
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Definition
| Assets are reported at the acquisition prices only |
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Term
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Definition
| Recording of transactions should be supported by evidence if possible |
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Term
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Definition
| Assumption that the business will continue indefinitely |
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Term
| GAAP Measuring Unit (Monetary Unit) |
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Definition
| Conventional accounting reports are expressed in money amounts |
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Term
| Transactions affecting Owner's Equity (4) |
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Definition
| Revenue, Expenses, Contributions and Withdrawals |
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Term
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Definition
| Matching Revenue with it's associated costs |
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Term
| GAAP Time Period Assumption |
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Definition
| Business can be divided into artificial time periods, revenue needs to be matched with expenses and assets/liabilities need to be adjusted |
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Term
| GAAP Full Disclosure Principle |
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Definition
| Must disclose any important information that can influence the judgement of an informed user |
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Term
| GAAP Materiality Constraint |
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Definition
| Seperate disclose is not necessary if the item is immaterial and will not change the judgement of an informed user |
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Term
| GAAP Cost Benefit Assumption |
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Definition
| Benefits of accounting efforts must exceed the costs |
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Term
| Accounting Cycle Steps (8) |
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Definition
| 1) Analyze transactions, 2) Record transactions to journal, 3) Post journal entries to ledger, 4) Prepare a trial balance, 5) Prepare and record adjusting entries, 6) Journalize and post closing entries at year end, 7) Prepare another trial balance, 8) Prepare financial statements |
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Term
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Definition
| DR increases for assets and expenses while it decreases for liabilities, equity and revenue |
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Term
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Definition
Made to properly match costs and expenses with revenue, 1) Adjusted deferred costs (recognize expense where cash was previously paid and recorded),
2) Accrue expenses(recognize expenses before cash paid),
3) Accrue revenue (recognize revenue before cash paid),
4) Adjust deferred revenue (recognize revenue where cash was previously paid and recorded) |
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Term
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Definition
| It is a contra asset account that is subtracted from the main asset |
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Term
| Errors in trial balances (4) |
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Definition
1) Failing to record or enter a particular transaction.
2) Entering a transaction more than once.
3) Entering one or more amounts in the wrong accounts.
4) Making an error that exactly offsets the effect of another error |
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Term
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Definition
| Proprietorship, Corporation and Partnership |
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Term
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Definition
expense account, the costs of acquiring the products that were delivered to customers during the accounting period
Cost of Goods Sold = Opening Inventory + Net Purchases ' Ending Inventory |
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Term
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Definition
| Provides the basis for recording sales and purchase transactions |
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Term
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Definition
| Credit terms are noted with 2/10 or n/30 in order to imply the discount amount by the amount of days |
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Term
| Sales contra accounts (2) |
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Definition
| Sales returns and allowances and sales discounts |
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Term
| Perpetual and Periodic system |
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Definition
| Perpetual is recorded when all transactions occur, periodic is recorded at the end of the month or a specified time |
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Term
| Perpetual and Periodic system |
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Definition
1) Perpetual is recorded when all transactions occur, The Inventory account is increased (debited) everytime merchandise is received and the Inventory account is decreased (credited) and the Cost of Goods Sold account increased (debited) with each sale,
2) Periodic is recorded at the end of the month or a specified time, Purchase Returns and Allowances and Purchase Discounts, are reset to $0 at the end of the accounting period and their balances distributed between Cost of Goods Sold and Inventory |
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Term
| FOB Destination/Shipping Point |
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Definition
| Purchaser bears shipping costs/Seller bears shipping costs. |
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