Intro to Accounting Notes

Intro to Accounting Notes

Certified Management Accountants (Camas): Certified professionals who specialize in accounting and financial management knowledge that typically work for a single company. Financial Accounting Standards Board (FAST): private organization that oversees the creation and governance of accounting standards. Securities and Exchange Commission (SEC): the US government agency that oversees the US financial markets. Generally Accepted Accounting Principles (GAP): the main US accounting rule book, created and governed by the FAST.

Cost Principle: states that acquired assets and services should be recorded at their actual cost. Going Concern Assumption: assumes that the entity will remain in operation for the foreseeable future. Accounting Equation: Assets=Liabilities + Equity Assets: an economic resource that is expected to benefit the business in the future. Liabilities: debts that are owed to creditors. Equity: the owners claim to the assets of the business. Retained Earnings: capital earned by profitable operations of a corporation that is not distributed to stockholders.

Net Income: the result of operations that occurs when total revenues are greater than total expenses. Revenues: amounts earned from delivering goods or services to customers. Expenses: the cost of selling goods or services. Steps to Analyze a Transaction Assets -? Liabilities + Equity (Contributed Capital & Retained Earnings) Cash + Acts Race + Supplies+Land = Acts Payable + Common Stock – Dividends + Revenue – Expenses 1) Identify the accounts & account type -Cash (Asset) & Common Stock (Equity) 2) Decide if each account increases or decreases 3) Determine if the accounting equation is in balance

Accounts Payable: a short term liability that will be paid in the future Accounts Receivable: business expects to receive cash in the future from customers for goods sold or services performed. 4 Types of Financial Statements 1) Income Statement: Reports net income/net loss Of business for specific period 2) Statement of Retained Earnings: Reports how the company’s retained earnings balance changed from the beginning to the end of the period. 3) Balance Sheet: Reports on the assets, liabilities, and stockholders’ equity of the business as of a specific date. 4) Statement of Cash Flows:

Reports on the business’s cash receipts and cash payments for a specific period. Return on Assets (ROAR): measures how profitably a company uses its assets. Return on Assets = Net income/Average total assets Average Total Assets = Beginning total assets + ending total assets /2 4 Reasons Stockholders Equity Can Change: Stockholders equity is broken out into two components, contributed capital and retained earnings, as shown in the accounting equation. The basic component of contributed stock capital is stock. Issuance of common stock increases stockholders’ equity.

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