ACCTNG 2400 1st EditionFinal Exam Study Guide Lectures: 1 - 24Based off of most important material on lecture notes, Practice Exam on MyGateway, and the list of what to know for the exam from Professor Van WertMaterial from lecture notes (condensed from previously posted lecture notes. Look at individual lecture notes for more detail/charts/other material covered):Lecture 1 (Jan 20)Business Activities (chronological order):1. Get money2. Buy services and things to operate3. Provide services and products to customers4. Collect payment from customers5. Pay for the things that were bought6. Repay those who provided moneyLecture 2 (Jan 22) I. Basic Accounting EquationASSETS (resources owned by the company) – LIABILITIES (resources owed to the creditors) = EQUITY (Resources owes to stockholders)Usually expressed: ASSETS = LIABILITIES + EQUITY Financial statements always balance out this equationII. Different Types of Creditors (Creditor is anyone whom money is owed), investors, and other external users1. Creditorsa. Banks – use financial statements to evaluate whether or not they will be repaid the money they loan to the companyb. Suppliers – check business’s credit standings and financial statements to make sure they will be repaid2. Investorsa. Stockholders – rely on financial statements to make sure the company is secure and profitable3. Other External Usersa. Customers – may use financial statements to judge company ability to provide service on its productsb. Governments – local, state, and federal collect taxes based on info used to prepare the financial statementLecture 3 (Jan 27)I. Assetsa. Cash - Cash, Bank account balancesb. Receivables - Accounts Receivable (amounts owed by customers for services or products sold to them)c. Supplies - Things typically used up in < 1 year in the course of doing business, likeoffice supplies, lubricants, fuels, etc.d. Inventory - Items held for sale to customers, like shoes (in a shoe store), canned goods (in a grocery store), or tanks of gasoline (in a gas station); can also be raw materials or partially-completed items in a manufacturing businesse. Prepaid (expenses) - Operating expenses paid to suppliers in advance (before receiving services or products from them); common for insurance, rent, subscriptionsf. Equipment - Things typically used for > 1 year, like machines, vehicles, furniture, some tools, etc.g. Buildings - Buildings and related attachments … sometimes called “plants” or “factories”h. Land – Also called “property”II. Liabilitiesa. Payables – o Accounts payable (owed to suppliers), o Wages payable (owed to employees), o Notes Payable (debt principal owed to lenders), o Interest Payable (interest owed to lenders), o Taxes Payable (owed to governments); i. NOTE: any of these may be summarized into a single amount called something like “Various Expenses Payable”b. Unearned (revenues) - Operating revenues collected in advance of actually providing the service or product; also sometimes called “deferred revenues” 3 types of obligations in liabilitieso Formal obligation – borrowing (notes and interest payable)o Informal Obligations – Result of operating activities (owed to suppliers, employees, governments)o Obligation to provide goods or services in the future – “unearned revenue”III. Equities – the right of the company’s owner to whatever assets are left if all debts were paida. Contributed Capital - Money or other assets contributed by owners; for a corporation, this is usually done by buying shares of the company’s stockb. Retained Earnings - The accumulated profits earned by the business since it started, less any dividends it has distributed to owners since the business startedLecture 4 (Jan 29)4 Basic Financial StatementsFinancial statements – 4 accounting reports that can be prepared at any time during the year, but usually are monthly or quarterly and annually.1. Balance Sheet – statement of current financial positiona. Includes amounts of assets and their total, liabilities and their total, and stockholders’ equity.b. Using the basic accounting equation, the balance sheet should come out even. The total liabilities plus stockholders’ equity will equal the total assets if correct.2. Statement of Retained Earnings – reports the way that net income and the distribution of dividends affect the financial position of the company during the period.a. (Retained earnings for beginning of the period) + (net income during that period)- (dividends paid out during that period) = (Retained Earnings balance for the endof the period)3. Income Statement – reports the amount of revenue less expenses for a time period.a. (Total Revenues) – (Total expenses) = (Net Income)4. Statement of Cash Flows – reports the operating, investing, and financing activities that caused increases and decreases in cash during the perioda. Operating – Activities that directly relate to running the business to earn profit including buying supplies, making the product, cleaning the store, buying advertising and fixing equipment, etc.b. Investing – Activities involved with buying and selling productive resources with long lives (buildings, land, equipment and tools), purchasing investments, lendingto others.c. Financing – any borrowing from banks, repaying loans, receiving contributions from stockholders, or paying dividendsOrder of Statement Prep1. Income Statement2. Statement of retained earnings3. Balance sheet4. Statement of cash flows The statements are prepared in this order because each statement provides information needed for the following statemento Net income from the income statement is used in the statement of retained earningso Ending retained earnings from the statement of retained earnings is used in the balance sheeto “Cash” from the balance sheet should match the ending cash balance on the statement of cash flowsLecture 5 (Feb 3)I. Independent External Auditing- Companies are required to hire an expert external auditor (Certified public accountant) to check their financial statements for accuracy, and to confirm that the company is not trying to cheat in any way on their statements. - Auditors provide “reasonable assurance” that management’s financial statements ”fairly represent” the company’s financial position and performance without “material misstatement”Unqualified vs. Qualified audit opinion- Unqualified – financial statements