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WVU ACCT 201 - Exam 1 Study Guide
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BIOM 121 1nd EditionExam # 1 Study Guide Lectures: 2 - 14Lecture 2 (January 10)*Lecture 1 was just an overview of the syllabusThere are three forms of businesses:- Sole Proprietorship- simple to establish, owner controlled, has tax advantages- Partnership- simple to establish, shared control, broader skills and resources, has tax advantages- Corporations- easier to transfer ownership, stand alone entity, owned by stockholdersLLCs are a hybrid form of business and combine the tax advantages of proprietorships and partnerships with the limited liability of corporations and are so referred to as limited liability companies (LLC)Lecture 3 (January 13)The four financial statements include:1. An income statement- Listing revenue and expenses2. Statement of shareholders’ equity- Common Stock, Dividends, etc.3. Balance sheet- Repots assets and claims to assets, Acct. equation4. Statement of cash flows- Reports the cash effects of a company’s operating, financing, and investing activitesAll of these statements flow within each other.Lecture 4 & 5 (January 15 & 17)Balance SheetAssets (Resources) = Liability (Obligations of the business) + Shareholders’ Equity (SE) 1. Current assets (should be recorded from highest to lowest liquidity)- Cash- highest liquidity- Account receivable- the right to receive money in the future(Anything receivable is an asset)- Inventory- goods available for future sales2. Long-term investment- investments in stocks and bonds of other corporations that are held for more than a year, long term assets such as land or buildings, long term notes receivable3. Property, Plant & Equipment (P,P,E)- assets with relatively long useful lives that are currently used in operating the business4. Intangible Assets (copyrights, TM, goodwill- the difference between the money to buy copyright and the money it sells for)5. Other- the “catch-all”Liability1. Current Liabilities- ______Payable (ex: account, salary, wages. Anything payable is a liability) - Unearned Revenue2. Long Term Liabilities- obligations that a company expects to pay after one yearStockholders’ Equity1. Contributed Capital => common stock2. Retained Earnings a. Net Income (Profit= revenue - expenses)i. Revenuesii. Expensesb. Dividends (cash payments to stockholders)Remember: Long-term means more than a yearLecture 6 (January 24)Property, Plant, and Equipment (P,P,E)- this is where you list all of your expensesAccumulated Depreciation- shows the total amount of depreciation that the company has expensed thus far in the asset’s life. This is displayed as a negative value or in parentheses.Current ratio- divides current assets by current liabilities and is rounded to one decimalLecture 7 (January 27)Assumptions in Financial Reporting- (pg. 65)- Monetary Unit Assumption- requires that only things that can be expressed as money are allowed in the accounting records- Economic Entity Assumption- states that every economic entity can be separately identified and accounted for- Periodicity Assumption- states that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business- Going Concern Assumption- states that the business will remain in operation for the foreseeable future.Principles in Financial Reporting-Measurement Principles- GAAP generally uses one of two measurement principles, the historic cost principle or the fair value principle.- Historic cost principle dictates that companies record assets at their cost. Meaning values are recorded in your balance sheet by amount purchased instead of market value- Fair value principle indicates that assets and liabilities should be reported at fair value which is the price received to sell an asset or settle a liabilityFull disclosure principle requires that companies disclose all circumstances and events that would make a difference to financial statement users. *Most important principles and assumptions are stated in bold* Values are recorded in your balance sheet by purchased value, not market valueLecture 8 (January 29)Professor goes over examples of completing a balance sheet and inputting information into the accounting equation. The best way to insure you are correct in your balance sheet is to remember the buzzwords for each category. Buzzword(s)Asset- Cash, ReceivableLiability- PayableShareholders’ equity- common stock, dividendsLecture 9 (January 31)Revenue Matching Principle- recognizes revenue when action happens, not exchange of moneyMatching Principle- states that expenses should be recorded during the period in which they areincurred, regardless of when the transfer of cash occursActual Accounting (accrual accounting)- the type of accounting that we focus on in this course. It records income items when they are earned and records deductions when expenses are incurred.T-accounts- an account consists of three parts, (1) the title of the account, (2) a left or debit side, (3) a right or credit side. The alignment of these parts makes up the T-account. Debits MUST equal credits. An account shows a debit balance if the total of the debit amounts exceedsthe credits and vice versa when an account shows a credit balance.Lecture 10 (February 5)General Journal- Transactions are initially recorded in chronological order in journals before they are transferred to the accounts. For each transaction, the journal shows the debit and credit effects on specific accounts. The most basic form of a journal that every company uses is a general journal.General Ledger- The entire group of accounts maintained by a company is referred to collectively as the ledger. A general ledger contains all the assets, liabilities, stockholders’ equity,revenue, and expense accounts.Lecture 11 (February 7)*Missing, will update by 2/18/14Lecture 12 (February 10)The professor’s teaching assistant goes over some examples of what goes into the debit or credit side. The following shows how to input $500 worth of supplies for 5 months into a balance sheet.Oct. 1DR Supplies $500CR Cash $500Oct. 31DR Supplies expense $100CR Supplies $100Assets = Liabilities + SESupplies Supplies expense-100 -100Lecture 13 (February 12)The professor goes over hot to input wage expenses if separated by the end of the month.Pay $100 per day, 5 days a week Mon.-Fri. after work.A = L + SEOn payday: -500 cash -500 wage expense1/31(Wed.): +300 wage payable -300 wage expense2/2


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