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)
-
Cash
Accounts Receivable
-
represent amounts owed to the company by its customers
Inventory
-
the product the company sells to its customers
Supplies
-
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
year
Accounts Payable
Short
-
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
Expenses
-
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
Definition
Unit 1 Review
Monday, February 6, 2017 01:59 PM
Unit 1 Page 1
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