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What are the two major types of Accounting?
Financial: Provides information for external decision makers
Managerial: Focuses on information for internal decision makers
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What is the GAAP?
- Generally Accepted Accounting Principles
- (Provides useful information for investment and lending decision)
- (Must be relevant, reliable, and comparable)
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What is the main Accounting equation?
- Assets = Liabilities + Owners Equity
- (Economic resources) = (Claims to economic recources)
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What are the 4 different Financial Statements
- Income Statement
- Statement of Retained Earnings
- Balance Sheet
- Statement of Cash Flows
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What is the AICPA?
The American Institute of Certified Public Accountants
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What is an Account?
- Detailed record of all changes that have occurred in a particular asset, liability, or stockholders’ equity
- (Asset, Liability, or Stockholder Equity)
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What are some Asset Accounts?
- -Cash
- -Accounts Receivable
- -Notes Receivable
- -Supplies
- -Building
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What are some Liability Accounts?
- -Accounts Payable
- -Salary Payable
- -Interest payable
- -Notes payable
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What are some Stockholder equity accounts?
- -Common Stock
- -Retained Earnings
- -Dividends
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What is the difference between Journals and Ledgers?
- -Journals keep chronological record of transactions while Ledgers hold the accounts and balances
- -Journals are organized by date while Ledgers are organized my account
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How do you increase an Asset account
With a Debit
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How do you Increase a Liability account
With a Credit
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How do you increase a Stockholder equity account
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How do you Decrease an Asset account?
With a Credit
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How do you Decrease a Liability Account?
With a Debit
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How do you Decrease a Stockholders equity account
With a Debit
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What is a Trial balance?
- A summary of the ledger
- Lists all accounts with their balances
- (NOT a balance sheet)
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What is Accrual Accounting?
Revenues are recognized when earned and Expenses are recognized when incurred
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What is the basic Accounting Period?
One Calender year or One Fiscal year
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What is the Matching Principal?
- Measures all expenses incurred during the period
- Match the expenses against the revenues earned during the same period
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What are the different Adjusting entries?
- Prepaid expense
- Depreciation
- Accrued expense
- Accrued revenue
- Unearned revenue
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What is the Accounting Cycle?
- Process used to produce Financial statements
- (Journalize transactions => Post to accounts => adjust accounts => prepare financial statements => close accounts)
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Why do we close accounts?
- Gets accounts ready for the next period
- Zeroes out revenue and expense accounts
- Updates Retained earnings
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What are the 4 steps to Closing?
- Close Revenues to Income Summary
- Close Expenses to Income Summary
- Close Income Summary to Retained Earnings
- Close Dividends to Retained Earnings
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What is Liquidity?
How quickly and item can be converted to cash
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What is the Current Ratio equation?
Current Assets / Current Liabilities
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What is the Debt Ratio equation?
Total Libilities / Total Assets
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