ACCT 102 1st Edition Exam 1 Study Guide Lectures 1 8 Lecture 1 January 16th Purpose of Accounting Identify measure record and communicate financial information For Profit main use entire goal to make money for owners owners Not For Profit raise money for specific cause goals Cause Stakeholders Capital Markets owners stockholders banks Marketplace people who sell goods to suppliers Government tax dollars employment benefits Employees comes from the internal of the company GAAP Generally Accepted Accounting Principles Only good in the U S A Run by Government Accounting Equation Assets Liabilities Stockholders Equity Asset things we get anything business owns or is going to own Liabilities things we owe to creditors Stockholders Equity things we owe to the owners stockholders Financial Statements Business records used to summarize transactions and used for communicating Income statement helps figure out how much money is made dealing with cost and revenue Statement of Changes in Stockholders Equity Things measured on stocks and dividends Lecture 2 January 21th Accounting Transactions a transaction is an economic event that can affect items in the financial statements Stock money shareholders give to own part of the company Retained Earnings all income that hasn t been spent Revenue anything earned as a business Expenses any resource used up to help the company Dividends give money back to stockholders Beginning retained earnings carry over from the year before Transaction Analysis Process of determining the effects of a transaction on the element of the accounting equation Assets Liabilities Beginning retained earnings Revenue Expense Dividends Double entry Accounting using the accounting equation each transaction affects at least two accounts Lecture 3 January 23th Income Statement Elements Revenues are the increase in assets that are the result from sales and Expenses are the cost of resources used to earn revenues during a period Revenues Expenses Net Income loss Statement of Stockholders Equity Contributed in two ways through purchases common stock or the company retaining net income Retained Earnings Net incomeearned but not paid out in the form of dividends Used to evaluate a company s dividends and retained earnings Beginning Stockholders Equity Stock Changes Net income Dividends Ending Stockholders Equity Balance Sheet Reports what a resources a company has and how it s obtained those resources Assets Liabilities Beginning retained earnings Revenue Expense Dividends Statement of Cash Flow Shows were a business get it s cash and spends its cash Financing Activities anything that involves bringing in money or paying back loans stocks o Issuing stock Borrowing money paying dividends repaying loans etc Investing Activities Things we need to do to get a business set up buying necessities selling equipment one time thing to make money Operating Activity Selling the goods that your business is known for on a day to day basis Financing Investing Operating Statement of Cash Flow Lecture 4 January 27th Business on Account Cash does not change but money is paid received later Accounts Receivable When a business receives cash in advance for services to do later This transaction increases assets and stockholders equity Accounts Payable When a business is given a service and hasn t paid yet it goes under the column Accounts payable This transaction increases Liability and decreases stockholders equity Cash Basis revenues recorded when cash received and expenses recorded when cash paid Accrual Basis Revenues recorded when earned and Expenses recorded when incurred Matching Concept Related revenues and expensed are reported in the same period Prepaid expenses Paid something in advance but still an asset until goods and services are used up creates an asset Unearned Revenue Receiving payment before goods or services are delivered creates a liability Adjustments Made at the end of a period to ensure accurate financial statements Types of Adjustments Accrued Revenue Accrued Expense Unearned Revenue Prepaid Expense Lecture 5 January 30th Accrued Revenue Goods or services provided but money not received Only happens when the new year breaks up the projects Increases assets account receivable Increase stockholders equity retained earnings for revenue Accrued Expenses Goods or services have been used but not yet paid for Increases liabilities accounts payable Decrease stockholders equity retained earnings for expense Unearned revenues Money received in advance goods or services now at least partially provided Increases stockholders equity retained earnings for revenue Decrease in liabilities unearned revenue Prepaid Expenses Money paid in advance goods or services now at least partially provided Decrease in asset prepaid expense Decrease stockholders equity retained earnings for expense Lecture 6 February 2nd Service Businesses produce revenue by providing a service to consumers Merchandising businesses produce revenue by buying merchandise and selling it to someone else Product costs costs that are included in inventory Beginning inventory balance inventory purchased during the period Cost of goods available for sale Selling and Administrative costs costs that aren t included in inventory They are sometimes called period costs Merchandise Inventory a product that the business sells for cash within a year Costs of Goods Sold Product sold during the period found in the expense column Gross Margin Sales Revenue Cost of goods sold Gross margin Purchase discounts offered sometimes to encourage buyers to pay early in order to get cash faster Ex 2 10 n 30 2 within 10 days must pay by 30 days to avoid interest Purchase Returns merchandise is sent back to the seller Purchase allowances when the seller allows a discount off the invoice price due to something other than paying the invoice early Lecture 7 February 4th Sales returns buyers return goods to the seller Adjust revenue and COGS Sales allowances buyer complains about goods to the seller but agrees to keep the goods in exchange for a reduced price Adjustments to sales revenue as a subtraction Sales Transaction providing goods to a customer in return for payment Must have one entry for revenue and one for entry COGS Sales discounts sellers may encourage buyers to pay early by offering a discount Adjustments posted to sales revenue as a subtraction Lecture 8 February 6th Freight key information on where the title changed hand Freight on Board o