Chapter 1 Review

Accounting is an information and measurement system that identifies, records, and communicates; relevant, reliable , and comparable information 

recording of transactions and events

Financial Accounting serves external users by providing them with general-purpose financial statements. 

Managerial Accounting serves internal users with reporting to help make decisions

Internal

• 1.Accounting employees
• 2.Managers
• 3.Controllers
• 4. Auditors
• 5. Sales Staff

External

• 1. Lenders
• 2. Consumers
• 3. External Auditors
• 4. Governments
• 5. Share Holders

Assets are resources a company owns or controls to yield future benefits.

Equiptment, Buildings, Land, Cash

Receivables refer to an asset that promises a future inflow of resources. A company that provides a service or product on credit is said to have an accounts receivable from that customer. 

Liabilities are creditors claims on assets reflect companies obligations to provide assets products or services to others.

Payable refers to a liability that promises a future out flow of resources

Wages, AP, Notes Payable, Taxes Payable

Equity is an owners claim on assets. 

Equity= Assets - Liabilities

Generally Accepted Accounting Principles

are concepts and rules for ethical accounting

Securities and Exchange Commissions

is a government agency that has the legal authority to set GAAP

Financial Accounting Standards

This is a local private board that sets both broad ans specific principles

International Accounting Standards Board

is an independent group that issues IFRS

International Financial Reporting Standards

Identify international preferred accounting practices

• 1. Measurement Principle AKA Cost Principle
•         Based on actual cost
• 2. Revenue Recognition
•         States when a company must  
•          recognize when revenue is incurred

• 3.Expense Recognition AKA Matching
•        Principle
•        States when an expense is incurred

• 4. Full Disclosure Principle
•        State that a Company must report
•        details behind financial statements  
•        that would impact users decisions.

1. Going Concern Assumption

•      Assumes that a business will continue    
•      and report at cost

• 2. Monetary Unit Assumption
•    
•     Assumes that we can express
•     transactions and events in a monetary or
•     monetary or money units

• 3. Time Period Assumption
•    
•     Assumes that a life of a company can be
•     broken into time periods

4. Business Entity Assumptions

•    Assumes that a business is accounted for  
•    seperatly from other entities

IS describes a companies revenues and expenses along with the resulting net income or loss over a period of time due to earnings and activities

Explains Changes in Equity from net income or loss and from any owner investments and withdraws over a period of time

Describes a company's financial position (types and amounts of assets liabilities and equity) at a point in time. 

Identifies cash inflows receipts and cash outflows , and payments over a period of time. 

Equity - Assets

Assets - Liabilities

+Owner capital - Owner Withdraws + Revenues - Expenses

Assets = Liabilities + Owner capital - Owner Withdraws + Revenues - Expenses