Create an account
rules adopted by accounting profession
1) comprised of both general and specific principles
2) knowm as generally accepted accounting principles
3)abbreviated as GAAP
4)intended to make info. in financial statements relevant, reliable, & comparable
rule requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue
Financial Acct Standards Board
primary source of new pronouncements of acct principles at the present time
White Comp. collected 1500$ cash on its acct recv. the effect of this transactioon as reflected in the acct equation are :
total assets, total liabilities, and equity are unchanged
primary objective in financial acct?
provide financial statements to help outside decision makers analyze an org.'s activities
business entity principle
to include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with this principle
accounting principle that requires accting info to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange
Max Experience Comp. acquired a building for 500,000$, it appraised at 575,000$. cost principle would require them to record the purchase at 500,000.
revenue is properly recognized when >>>
upon completion of the sale or when services have been performed and business obtains the right to collect the $
financial statement providing information that helps users uncerstand a companys financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date,
- economic resources owned or controlled by the business
- are expected to provide future benefits to the business
-appear on the balance sheet
-claims on them are shared btw creditors and owners
Zion company has assets of $600,000, liabilities of $250,000 and equity of $350,000. It buys office equipment on credit for $75,000. The effect of this transaction include:
Assets increase 75,000$ and liabilities increase by $75,000
Business Entity Principle
principle that requires every business to be accounted for separately and distinctly from its owner or owners is known as business entity principle
collection of all accounts used by a business and their balances is called a general ledger
liabilities created when a customer pays in advance for products or services before the revenue is earned
an accounting system that records the effects of transactions and other events in at least 2 accounts with equal debits and credits
Credit is used to record :
-decrease in an expense acct
-decrease in an asset acct
-increase in an unearned rev. acct
-increase in rev. acct
difference between the total debits and total credits for an acct including beginning balance
wisconsin rentals purchased office supplies on credit. The general journal; entry made by Wisconsin rentals will include>>>>
credit to accounts payable
recorded as a credit to unearned revenue acct
a liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to customer
provides place for : -transaction dates -- names of accts involved --- amt of each debit and credit --- explanation of the transaction
Trial Balance is a list of all accts from the ledger with their balances at a point in time. t/F?
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