[MGMT 1B] - Midterm Exam Guide - Ultimate 37 pages long Study Guide!

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MGMT 1B
MIDTERM EXAM
STUDY GUIDE
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Tuesday, January 10, 2017
Management 1B
Week 1: Accounting is an Information System
I. Users:
A. Creditors: how big a risk you are
B. Investors: determine when to buy and when to sell
C. Management: to help make decisions
D. Government: GAO, IRS
E. Regulatory Agencies
F. Advisors
II. Careers in Accounting
A. Industry
B. Government
C. Banking
D. Public Accounting
III. Public Accounting
A. Taxation
B. Consulting
C. Auditing
IV. CPA
A. Education: 5th year of education
B. Experience: work for 1 year under CPA
C. Quiz: CPA Exam
V. Accounting Minor
VI. Two Movements in accounting
A. Away from historical cost to fair value
B. Convergence between US GAAP (FASB) and IFRS (IASB)
VII. Qualitative Characteristics of Financial Information
A. Relevancy: information is relevant if it influences actions of decision makers
!1
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Tuesday, January 10, 2017
B. Reliability: information accurately depicting conditions
C. Comparability: Usefulness is enhanced if we can compare our financial
statement with prior year financial statements and with other companies’
financial statements
D. Consistency: We should apply the same accounting principles every year. We
are allowed to change methods, but we must state the reason for the change
and the effect of the change.
VIII. GAAP (Generally Accepted Accounting Principles)
A. Entity: A company is an economic unit separate and distinct from the owners
B. Going Concern: We assume that a company will continue to operate indefinitely
C. Periodicity: We cannot wait forever to evaluate performance
1. Accounting Period: Usually one year or operating cycle whichever is longer.
2. Operating Cycle: “Cash to Cash”
D. Monetary Unit: Everything measured in dollars. Assume inflation is insignificant.
E. Objectivity: Accounting information must be free from bias and verifiable by an
independent party.
F. Historical Cost: We record the acquisition of goods, services, and other
resources at their exchange price. We capitalize these costs (put them into an
asset account) and expense them over the period in which we benefit from them.
G. Full Disclosure: Everything that is relevant must be disclosed in the financial
statements and/or in the notes to the financial statements.
H. Substance Over Form (not in the textbook): When the economic substance of a
transaction differs from the legal form, accountants emphasize the economic
substance.
1. “Don’t judge a book by its cover.”
2. Application: Disney and Pixar
I. Revenue Recognition: When is revenue recorded in the financial statements?
1. For many situations...
a) At the Point of Sale.
b) Accrual Accounting
2. New Revenue Recognition to go into effect for reports issued after December
15, 2016.
a) Contract Method
!2
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