ACCT 201 1st Edition Exam 4 Final Study Guide All Lectures Lecture 2 January 10 Lecture 1 was just an overview of the syllabus There 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 stockholders LLCs 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 2 3 4 An income statement Listing revenue and expenses Statement of shareholders equity Common Stock Dividends etc Balance sheet Repots assets and claims to assets Acct equation Statement of cash flows Reports the cash effects of a company s operating financing and investing activites All of these statements flow within each other Lecture 4 5 January 15 17 Balance Sheet Assets 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 sales 2 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 receivable 3 Property Plant Equipment P P E assets with relatively long useful lives that are currently used in operating the business 4 Intangible Assets copyrights TM goodwill the difference between the money to buy copyright and the money it sells for 5 Other the catch all Liability 1 Current Liabilities Payable ex account salary wages Anything payable is a liability Unearned Revenue 2 Long Term Liabilities obligations that a company expects to pay after one year Stockholders Equity 1 Contributed Capital common stock 2 Retained Earnings a Net Income Profit revenue expenses i Revenues ii Expenses b Dividends cash payments to stockholders Remember Long term means more than a year Lecture 6 January 24 Property Plant and Equipment P P E this is where you list all of your expenses Accumulated 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 decimal Lecture 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 ReportingMeasurement 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 liability Full 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 value Lecture 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 Receivable Liability Payable Shareholders equity common stock dividends Lecture 9 January 31 Revenue Matching Principle recognizes revenue when action happens not exchange of money Matching Principle states that expenses should be recorded during the period in which they are incurred regardless of when the transfer of cash occurs Actual 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 exceeds the 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 14 Lecture 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 1 DR Supplies CR Cash 500 500 Oct 31 DR Supplies expense CR Supplies Assets Supplies 100 Liabilities 100 100 SE Supplies expense 100 Lecture 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 SE On payday 500 cash 500 wage expense 1 31 Wed 300 wage payable 300 wage expense 2 2 Fri 500 cash 300 wage payable 200 wage expense Lecture 14 February 14 Temporary account gets reset during closing Because revenues expenses and dividends relate only to a given accounting period they are considered temporary Permanent accounts in