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NDSU ACCT 102 - Exam 1 Study Guide

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ACCT 102 1st Edition Exam# 1 Study Guide Lectures: 1 - 8Lecture 1 (January 16th)Purpose of Accounting: Identify, measure, record and communicate financial informationFor-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 companyGAAP: Generally Accepted Accounting Principles- Only good in the U.S.A- Run by GovernmentAccounting 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/stockholdersFinancial 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 dividendsLecture 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 beforeTransaction Analysis: Process of determining the effects of a transaction on the element of the accounting equation.- Assets= Liabilities + Beginning retained earnings + Revenue – Expense – DividendsDouble-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 stockor 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 EquityBalance Sheet: Reports what a resources a company has and how it’s obtained those resourcesAssets= Liabilities + Beginning retained earnings + Revenue – Expense – DividendsStatement 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/stockso 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 FlowLecture 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 whenthe new year breaks up the projects.- Increases assets-account receivable- Increase stockholders’ equity-retained earnings for revenueAccrued Expenses: Goods or services have been used, but not yet paid for.- Increases liabilities-accounts payable- Decrease stockholders’ equity-retained earnings for expenseUnearned revenues: Money received in advance, goods or services now at least partially provided.- Increases stockholders’ equity-retained earnings for revenue- Decrease in liabilities-unearned revenuePrepaid Expenses: Money paid in advance, goods or services now at least partially provided- Decrease in asset-prepaid expense- Decrease stockholders’ equity-retained earnings for expenseLecture 6 (February 2nd)Service Businesses: produce revenue by providing a service to consumersMerchandising 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 saleSelling 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 yearCosts of Goods Sold: Product sold during the period, found in the expense columnGross Margin: Sales Revenue – Cost of goods sold = Gross marginPurchase discounts: offered sometimes to encourage buyers to pay early in order to get cash faster.Ex) 2/10, n/302% 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 COGSSales 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 subtractionSales Transaction: providing goods to a customer


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