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UA ACCT 200 - Final Exam Study Guide

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ACCT 200 1st Edition Final Exam Study Guide: Lecture 1-22Lecture 1BASIC ACCOUNTING EQUATION: Assets=liabilities + stockholders’ equityLiabilities – debts owed to creditors (accounts payable, notes payable, wages payable and unearned revenue)Stockholders’ Equity – owners’ claim to net value of company (common stock, retained earnings)Communicating through financial statements: financial statements are periodic reports published by the company for the purpose of providing information to external usersIncome statement – financial statement that reports only the revenues and expenses over an interval of time; shows whether the company was able to generate enough revenue to cover the expenses of running the business, shows if there was a net profit or lossStatement of stockholders’ equity – financial statement that summarizes the changes in stockholders’ equity over an interval of time; consists of common stock + retained earningsBalance sheet – financial statement that presents the financial position of the company on a particular date; summarized by basic acct equation (assets=liabilities + stockholders’ equity) Statement of cash flows – financial statement that measures activities involving cash receipts and cash payments over an interval of time; can be classified into three categories (operating cash flows, investing cash flows, financing cash flows)Lecture 2Assets=Liabilities + EquityA=L + (com. stk. + ret. earn.)A=L + (com. stk. + [beginning ret. earn. + revenue – expenses – dividends])Assets + expenses + dividends=Liabilities + com. stk. + beg. ret. earn. + revenue (simple math rearranging)(This side ^) Dr + and Cr – (this side ^) Dr – and Cr +Lecture 3When you pay a phone bill, you have less cash (asset) and less retained earnings (equity). Cash is decreased, so credited. Retained earnings are going down because an expense went up, and when an expense increases, it is debited. So for every business transaction, there should be a debit and a credit. Total debits must equal total credits in a trial balance (the summary of the ending balance in each account is called a trial balance). Debits are referred to as “left” and credits as “right”. Debits are written above credits, and credits should be indented. Moving debit and credit info from the journal to individual accounts in the general ledger is called “posting”. Assets and expenses should have a debit balanceDividends have to have a debit balanceLiabilities and revenues should have a credit balanceCommon stock has to have a credit balanceA checking account should be a debit but if it has a credit then it is overdrawnIt is rare to credit an expenseLecture 4Review of adjusting journal entries:Prepaid expenses (supplies, prepaid insurance, prepaid rent)Original entry: dr prepaid insurance, cr cashAdjusting entry: dr insurance exp (increase expense/decrease equity), cr prepaid insurance (decrease asset)Only adjust for amount that has been usedAdjusting entries NEVER change cash account!!!Depreciation – we record to show usage of long term equipment, such as vehiclesAdjusting entry: dr depreciation expense, cr accumulated depreciation(Accumulated depreciation is a contra asset – listed with the assets but is subtracted from assets)Equipment: 100,000 drAccumulated depreciation: 10,000 crNet equipment: 90,000 net value (dr)Accrued revenues – revenue earned but not recorded (interest on investments, record a sale on account)Adjusting entry: dr acct receivable, cr revenueAccrued expenses – have been incurred but not yet recordedAdjusting entry: dr expense (wages due), cr liability Lecture 5Internal Controls:Know basic what, when, and companies of Sarbanes-Oxley Act (SOX) of 2002Misuse of company resources includes wasting your time at work – being on Facebook, sending personal emails through work address, etcMonitoring is when managers make sure employees are doing what they’re supposed to do andaren’t using loopholesExamples of control activities (read in book too):Preventive controls:1. Separation of duties – 1 person per job to pinpoint who is causing problems2. Physical controls – such as locks, passwords, security cameras3. Proper authorization – limit access to information4. Employee management – supervision and trainingDetective controls:1. Reconciliations – keeping inventory 2. Performance reviews – management giving feedback for improvementCEO and CFO are ultimately responsible for the company’s internal controlsErrors are more likely than fraudWho you hire is all-importantBank Side Book SideStart w/bank statement balance Start w/check book balanceAdd deposits in transit Deduct NSFDeduct outstanding checks Deduct service fee expenses/chargesAdd notes collected by bank Add interest related to notes receivable+/- errors madeAdjusted bank balance = Adjusted book balanceKNOW: NSF check: dr accounts receivable, cr cashService fee expense: dr service fee expense, cr cashNotes receivable: dr cash, cr notes receivableLecture 6Sales discount – incentive to pay quickly2/10 n/30 means customer receives 2% discount if they pay within 10 days; no discount if over 10 days (still must be within 30 days)Sales discount – contra revenue account; debit balance; reduces revenuesWrite-off means the company is never going to receive the moneyBalance of uncollectible accounts means either:-overestimated last period-still waiting on some accounts receivableAcct receivable transactions:SalesSales returnSales discountTrade discountCollection from customer w/out discountReceivables – value on balances at “true” collectible value=net realizable valueSet up contra asset account - - allow for uncollectible accountsLecture 7Matching bad debt expense is recorded in same year as revenuesH Jones company goes bankrupt so $1000 they owe will never get paid“write off the account” – removes acct receivable and reduces allowance for uncollectable acctAllow for uncollectable acct 1000Acct receivable 100090,000 in acct receivable5% uncollectable90,000*.05=4500 in allow acct as end balanceInterest rates are always annual for this class; don’t forget to adjust calculations for interest based on how many months are includedLecture 8FIFO – best methodLIFO – good for tax purposes to save money; 10-15% of companies use LIFO; isn’t allowed internationallyWeighted-Average Cost – simplestIf costs are risingLIFO – lowest end inventory, highest COGS, lowest net


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