accounting 201

sales- sales discount-sales return and allowances=net sales

beginning inventory+ net cost of purchases= cost of goods available for sale

purchases- purchase discounts-purchase returns and alllowances+freight in= net cost of purchases

cost of goods available for sale- ending merchandise= cost of goods sold

physical count of inventory

computerized record of merchandise inventory

cost of goods available for sale/ number of units available= weighted average cost per unit

debiting one account and crediting another

period used for calculating yearly financial statements in businesses and other organizations

ledger account used in the closing stage of the account cycle, temporary

goods and services should be recorded at their historical costs not current value

the dollar is stable, it does not lose its purchasing power

every entry into an account requires a corresponding and opposite entry to a different account

divides ongoing activities in a business into periods of a year, quarterly, monthly, and weekly

• cash 
• accounts receivable 
• notes receivable
• prepaid expense
• equipment, furniture, fixtures
• building
• land

• accounts payable
• notes payable
• accrued liability
• unearned revenue

• common stock- increases
• dividends- decreases
• revenues - increases
• expenses- decreases

detailed record of all increases and decreases that have occurred in an account during a specific period

used to organize a company's accounts

record holding of all of the accounts of a business, the changes in the accounts, and their balances

used to record dual effects of each transaction

record of the transaction in date order

transferring data from the journal to the ledger

summary of the ledger listing all of the accounts with their balances

• revenue is recorded when earned
• expenses are recorded when paid
• not allowed under gaap

• revenue is recorded when earned 
• expenses are recorded when cash is paid
• used by most businesses

• dictates when to record revenue and the amount of revenue to record
• record revenue when earned
• might be different from cash collections revenue is based on the actual selling price of the items or service

• guides account for expenses
• expenses are recorded when they are incurred during the period
• expenses are matched against the revenue of the period

deferrels and accuals

• prepaid rent
• office supplies
• depreciation

• occurs when a company receives cash before it does the work or delivers a product
• considered a liability

expenses a business has incurred but not yet paid

• salaries 
• interest
• utilities

• performed a service but has not yet collected cash
• -debit to accounts receivable
• -credit to service revenue

• a summary of all accounts with adjusted balances
• ensure total debits equal total credits
• ensures balance sheet items are properly valued

• income statement
• statement of retained earnings
• balance sheet

reports revenue and expenses and calculates net income or net loss for the period

shows how retained earnings changed during the period

reports assets, liabilities, and stockholders equity as of the last day of the period

zeros out all revenues and expense accounts in order to measure each periods net income separately from all other periods

• business owned under state law, separate legal entity 
• stockholder ownership
• life span is indefinite

revenues-expenses=net income or net loss

(beginning+net income or -net loss)- dividends for the period= retained earnings

• an information system that
• -measures business activity 
• -processes the information into reports
• -communicates the results to decision makers

• (managerial accounting)
• 1. how much money does the business budget for production?
• 2. should the business expand to a new location?
• 3. how do actual costs compare to budgeted costs?

• (financial accounting)
• 1.should I invest in a business?
• 2.Is the business profitable?
• 3.should we lend money to the business?
• 4.can the business pay us back?

• generally accepted accounting principles
• -relevent
• -faithfully representative

an organization that stands apart as a separate economic unit

• 1. expenses put in left side of income summary
• 2. revenues put in right side of income summary
• 3. take end balance of income summary and put it in right side of retained earnings
• 4. dividends in left side of retained earnings
• 5. find ending balance of retained earngings

• a list of all the accounts and their balances at the end of the period after journalizing and posting the closing entries
• includes only permanent accounts