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[33:382:103] - Final Exam Guide - Everything you need to know! (99 pages long)


Department
Entrepreneurship
Course Code
33:382:103
Professor
Raymond Stein
Study Guide
Final

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Rutgers
33:382:103
FINAL EXAM
STUDY GUIDE

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Accounting for Entre & SB: Lecture #1 (Chapter 1 and 2)
Chapter 1
GAAP: Generally Accepted Accounting Principles
-Created by different organizations, such as FASB and SEC.
-FASB: How should one account for different accounting situations? They release a
statement telling others how to use accounting.
-SEC (Security and Exchange Commission):
-Cost: Cost is always certain, it is not subjective like worth is. Cost is how the value of
something is determined by a company.
A = L + E (The Basic Accounting Equation)
- 100% true all the time.
-A is Assets: Anything a company owns. They are valued by their cost. Something more
expensive is more valuable than something that is not as costly.
-L is Liabilities: Amounts the company owes to employees, landlords, government, bank, etc.
-E is Equity: What is left after subtracting the liability from the assets, what the owner has.
-House cost is $300,000, liability (mortgage) is $100,000, equity is what is left, $200,000.
-Revenue: What you earn doing what you do; income. (Company has $10,000)
-Expense: What gets used up and consumed in the process of earning revenue. (Use up
$8,000)
-Net Income: What is leftover after expenses are paid ($2,000). If you spend more than your
income, that is called net loss.
-Company and owner are separate - personal financial decisions of owner should not affect
company.
-Company starts off with $10,000, uses $2,000 to buy a computer. Equity is still $10,000, just
dispersed in different ways. The you buy a desk for $1,000 on credit so you don't use cash.
Now you have a liability, but the equity is still $10,000.
-Financial statements are reports of how money was handled at a company throughout a
period of time. People judge your cpm any through these financial statements
-Name of organization is at top, then under that is the type of statement it is, and then the
third line is the date the report encompasses.
-Income statements: Lists revenues and expenses, and calculates net loss and net income.
-Statement of owner’s equity: Start with beginning balance and end with ending balance
over a period of time, same time period as income statement.
-At the beginning you might have an investment. More investment makes equity grow.
You also have the number that is your net income. The equity goes down when you
make a withdrawal from your company, if you wanted to take back money that you didn't
need in the company. Don’t put in $0 if one of the lines doesn’t apply to you - just put in
what applies.
-Balance Sheet: Reports of the Basic Accounting Equation. Assets, Liabilities, and owner’s
equity are listed throughout time.
-Statement of Cash Flows
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-Return On Assets: Net Income divided by Average Total Assets. How much are you making
off your assets? Assets are put in the company to generate income.
Chapter 2
-Receivable: the right to receive, like when you do something on credit. Someone owes you
something, so you have the right to collect. All kinds of receivables are assets.
-Payables: what the company has to pay. They are all liabilities.
-Any account is described using a T chart, with the title of the chart at the top, and the Debit
and Credit side. “Normal” refers to ending balance.
-Owner Withdrawal is equity, it is not an expense to take money out of your own account.
-Collections do not lead to revenue. Only performances do that.
Types of Accounts
DR (Debit)
CR (Credit)
Assets
Up
Down
Liabilities
Down
Up
Equity
Down
Up
Revenue
Down
Up
Expense
Up
Down
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