ACCT1006 Study Guide - Midterm Guide: Retained Earnings

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3 Oct 2019
Thursday, 19 September 2019
ACCT1006 midsem
GAAP (W1)!
-Asset definition: have future economic benefits !
1. resource control by entity!
2. as a result of past events!
3. from which future economic benefits are expected to flow to entity !
-How do future economic benefits flow to entity which controls the supplies? Use !
Adjusting entries (W2)!
-To update ledger accounts!
-Performed when financial statements are prepared !
-Example of adjusting entires !
Original: DR rent exp 36,000 CR cash!
Adjusting: used $3000; thus DR prepaid rent 33,000 CR rent exp 33,000!
Inventory (W3/4)!
-Basis on what inventory is measured: Lower of cost and NRV (net realisable
if cost > NRV, write down inventory to NRV!
if cost <NRV, no change required !
-For cost, can be actual cost (unit identification method) or make cost flow
assumptions (FIFO, average, LIFO)!
-Inventory systems!
Perpetual inventory: apply cost flow assumption continuously throughout !
Periodic inventory: apply cost flow assumption only at the end (ONCE)!
-Example: Perpetual inventory at FIFO!
End value (not always recorded financial statements) as it can be adjusted by
stock-take adjustment & LCNRV !
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