RSM220 TEXTBOOK SUMMARY/FINAL EXAM GUIDE - EVERYTHING YOU NEED TO KNOW A 16 page document that includes EVERYTHING you will need to know for the final exam (and midterms) - includes definitions, everything you need to memorize, etc. It is a 16 page study

16 Pages
367 Views
Unlock Document

Department
Rotman Commerce
Course
RSM220H1
Professor
Dragan Stojanovic
Semester
Winter

Description
1 of 16 Chapter One: The Cdn Financial Reporting Environment AcSB (Canadian Accounting GAAP for private entities, not-for- CICA Handbook Standards Board) profit corporations, pension plans due process AcSOC EIC (EIC Abstracts) IASB (International GAAP for public companies (IFRS) Original IASC Accounting Standards Board) IASC Foundation IFRIC (IFRIC Interpretations) SAC (Standards Advisory Council) FASB (Financial Accounting GAAP for U.S. entities SEC Standards Board) Funding should be (according to IASB): BCOC Broad-based: It should not rely on one or a few sources. Compelling: Constituents should not be allowed to benefit from the standards without contributing to the process of standard setting. Open-ended: Financial commitments for funding should not be contingent upon any particular outcomes that may infringe upon independence in the standard-setting process. Country-specific: Funding should be shared by the major economies on a proportionate basis. Chapter Two: Conceptual Framework (1)Objectives of Financial Reporting: goals/purposes (2a) Qualitative Characteristics: bridge b/w level 1 and 3 i. FUNDAMENTAL Qualitative Characteristics a. Relevance i. Predictive/feedback value b. Representational Faithfulness i. Neutral, complete, free from material error/bias ii. Transparency ii. ENHANCING Qualitative Characteristics a. Comparability b. Verifiability c. Timeliness d. Understandability iii. CONSTRAINTS a. Materiality b. Trade-offs c. Cost vs. Benefits (2b) Elements of Financial Statements: bridge b/w level 1 and 3 iv. ASSETS a. They involve present economic resources (scarce/capable of producing cash flows) b. The entity has right or access to these resources where others do not (restricted/enforceable) v. LIABILITIES (alsoconstructive obligations) a. They represent an economic burden or obligation b. The entity has a present obligation which is enforceable vi. EQUITY: net assets is a residual interest in the assets of an entity that remains after deducting its liabilities (i.e. net worth) vii. REVENUES: Increases in an economic resources either by: a. Inflows b. Enhancement of entitys assets c. Settlement of liabilities resulting from the entitys ordinary activities viii. EXPENSES: Decrease in economic resources either by: a. Outflows b. Reduction in assets 2 of 16 c. Incurrence/creation of liabilities from entitys ordinary revenue-generating activities ix. GAINS: increases in equity (net assets) from an entitys peripheral or incidental transactions and from all other transactions and other events and circumstances affecting the equity during a period, except those that result from revenues or investments by owners x. LOSSES: decreases in equity (net assets) from an entitys peripheral or incidental transactions and from all other transactions and other events and circumstances affecting the entity during a period except those that result from expenses or distributions to owners xi. COMPREHENSIVE INCOME: net income + other comprehensive income (3) Foundational Principles: implementation i. RECOGNITION/DERECOGNITION a. Economic Entity Assumption: can identify an economic activity w/ a particular unit of accountability (legal unit and subsidiaries) b. Control. Components: i. There is power to direct the entitys activities. The reporting entity must be able to make strategic decision for the entity. ii. Only one entity has the power to direct the activities of the entity in question. Control precludes the sharing of power. iii.Power need not be exercised or absolute. Reporting entity must have ability to control other entity, it need not exercise that control. iv. The reporting entity should have access to the benefits from the entity. c. Revenue Recognition and Realization (ref. page 6) i. Revenue Recognition Principle: 1. Risks and rewards have passed or the earnings process is substantially complete 2. Measurability is reasonably certain 3. Collectability is reasonably assured ii. Contract-based Approach: 1. Contract recognized when: a. The entity becomes party to the contract b. The resulting rights and obligations are measureable (inc. credit risk) 2. Resulting revenues recognized when: a. Control over the goods passes b. Performance obligations are settled d. Matching: Efforts (expenses) matched with accomplishment (revenues) when reasonable ii. MEASUREMENT a. Periodicity: Enterprises economic activities can be divided into artificial time periods. b. Monetary Unit: Money is the common denominator of economic activity; appropriate basis for accounting measurement and analysis. c. Going Concern: Assumption that business will continue to operate for foreseeable future d. Historical Cost: 3 assumptions: i. It represents a value at a point in time ii. It results from a reciprocal exchange (i.e. two-way) iii.The exchange is with an outside party e. Fair Value: the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction b/w market participants at the measurement date exit price (market- based vs. entity-specific synergies) iii. PRESENTATION/DISCLOSURE a. Full disclosure: detailed enough and condensed enough FINANCIAL REPORTING ISSUES: Management remuneration arrangements; debt covenants; EPS Principle-based (IASB/CdnGAAP) vs. Rules-based (FASB); Financial Engineering Chapter Three: Accounting Information System ASSETS = LIABILITIES + SHAREHOLDERS EQUITY 3 of 16 Assets = Liabilities + Common + Retained - Dividends + Revenues - Expenses Shares Earnings DR. + CR. - DR. - CR. + DR. - CR + DR. - CR. + DR. + CR. - DR. - CR. + DR.+ CR.- The Accounting Cycle: 1. Identification and measurement of transactions and other events; external vs. internal 2. Journalization; general journal 3. Posting; journal general ledger 4. Trial balance preparation 5. Adjustments revenue recognition principle and proper matching PREPAYMENTS ACCRUALS 1. Prepaid Expenses. Expenses paid in cash and 3. Accrued Revenues. Revenues earned but not yet recorded as assets before they are used/consumed. received in cash or recorded. 2. Unearned Revenues. Revenues received in cash 4. Accrued Expenses. Expenses incurred but not yet and recorded as liabilities before they are earned. paid in cash or recorded. Adjusting Entry: Prepaid Expenses Adjusting Entry: Unearned Revenue Asset Expense Liability Revenue Unadjusted Credit Debit Debit Unadjusted Credit balance adjusting adjusting adjusting balance adjusting entry (-) entry (+) entry (+) entry (+) Adjusting Entry: Accrued Revenue Adjusting Entry: Accrued Expenses Asset Revenue Expense Liability Debit Credit Debit Credit adjusting Adjusting adjusting adjusting entry (+) Entry (+) entry (+) entry (+) 6. Adjusted trial balance 7. Statement preparation 8. Closing a. Income Summary: Revenue accounts (credit +) Income Summary for Revenue (credit +) Expense accounts (debit +) Income Summary for Expense (debit +) Income Summary $XXX (usually credit balance) Retained Earnings $XXX b. Inventory: Perpetual and Periodic 9. Post-closing trial balance 10.Reversing Entries Chapter 4: Reporting Financial Performance: INCOME STATEMENT: Usefulness: 1. Evaluate the enterprises past performance and profitability. 2.
More Less

Related notes for RSM220H1

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit