ACCTMIS 2200 Midterm: 4. Unit 1 Review

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Accounting - the means by which we measure and describe the economic activities of a
business AND communicate these results to interested users
Accounts Receivable
represent amounts owed to the company by its customers
Accruals - transactions for which cash has NOT been received/paid, but the related
revenue/expense has been earned/incurred and must be recorded (action before cash)
Debit an expense & credit a liability
Accrued Expenses - expenses incurred but not yet paid in cash or recorded
Debit an asset & credit a revenue
Accrued Revenues - earned but not yet received in cash or recorded
Contributed Capital (common stock)
represents investments made by owners into the business
through the purchase of the organizations' stock
Cost of Goods Sold (cost of inventory sold)
Accounts Receivable
represent amounts owed to the company by its customers
the product the company sells to its customers
items used in the normal course of business (not the same as inventory)
Current Assets
assets expected to either be converted into cash or expire (be used up) within one
Accounts Payable
Term Notes Payable (Bank Loans)
Salaries Payable
Income Taxes Payable
Utilities Payable
Current Liabilities
liabilities expected to be paid within one year
Deferrals - transactions for which cash has been received/paid while the related
revenue/expense has not been recorded (cash before action)
Ex. Prepaid Insurance, Prepaid Rent, Supplies
Deferred Expenses (Prepaid Expenses) - company pays for an expense in advance; pre-
payment is recorded as an asset and only becomes an expense when its 'used up'
Depreciation - the systematic allocation of the cost of a plant asset to expense over its
useful life
Cost of Goods Sold (cost of inventory sold)
cost of the inventory sold
Salaries Expense
Rent Expense
Utilities Expense
Interest Expense
Advertising Expense
Income Tax Expense
Income Statement Equations:
Revenues - Expenses = Net Income
Sales Revenue - Cost of Goods Sold = Gross Profit
costs incurred in the process of earning revenues
Financial Accounting - used by 'outsiders' to make decisions
FASB Does not have express authority to develop GAAP
Financial Accounting Standards Board (FASB) - private sector org that develops most of
the GAAP rules
Unit 1 Review
Monday, February 6, 2017 01:59 PM
Unit 1 Page 1
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