Summary
Summary + all lectures notes for Accounting 2023
- Course
- Institution
- Book
This document contains a summary + all lecture notes for the Accounting 2023 course
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
Summary + lecture notes Accounting (Horngren's Accounting)
-
Accounting | Summary
-
Accounting oefenopgaven met antwoorden (meerkeuze)
Seller
Follow
ievewillems
Reviews received
Content preview
Summary Accounting (Year 2)Video lecture 1 (12-04-23)
Chapter 1: Accounting and the business environment
Why is accounting important?
- Accounting is the information system that measures business activities,
processes the information into reports, and communicates the results to the
decision makers.
Two types of accounting:
1. Financial accounting
- External decision makers
- Should I invest in the business?
- Is the business profitable?
2. Managerial accounting
- Internal decision makers
- How much money should the business budget for production?
- Should the business expand to new locations?
Organizations that govern accounting:
For the USA:
FASB > Financial Accounting Standards Board
- Privately funded
- Creates the rules and standards that govern financial accounting
In Europe: International Accounting Standards Board (IASB)
SEC > Securities and Exchange Commission
- Oversees the US financial markets
In Europe: European Securities and Market Authority (ESMA)
Generally accepted accounting principles (GAAP):
- Guidelines that govern accounting
- Based on conceptual framework
- Relevant: the information allows users to make a decision
- Faithfully representative: the info is complete, neutral and free from error
Accounting assumptions:
- Economic entity assumption
- Monetary unit assumption
- Cost principle
- Going concern assumption
The accounting equation:
- Assets = liabilities + equity
The accounting equation MUST always be in balance!
- Assets: economic resources that are expected to benefit the firm in the future
(land, cash, inventory, furniture)
- Liabilities: debts that are owed to creditors (notes payable, accounts payable,
salaries payable)
- Equity: owner’s capital invested in the organization (owner’s capital, owner’s
withdrawals)
, Equity= owner’s capital - owner’s withdrawals + revenues – expenses
Transactions:
- A transaction is a very special kind of historical event > 2 premises
1. It involves the exchange of economic resources
2. We must be able to measure the economic impact in monetary units
See video lecture 1
Financial statements > 4 kinds:
1. Income statement
2. Statement of owner’s equity
3. Balance sheet
4. Statement of cash flows
These are 4 basic financial statements used by all firms as the primary means of
communicating to stakeholders
Income statement: reports the success or failure of the company’s operations
for a period of time. How well is a company doing in a certain period.
- Revenues – expenses = net income (profit)
Statement of owner’s equity: shows amounts and causes of changes in
owner’s capital during a certain period
- Owner contribution + net income – owner withdrawal
Balance sheet: reports assets and claim to those assets at a specific point in
time
- Assets = liabilities + owner’s equity
Statement of cash flows: answers the question of whether the business
generates enough cash to pay its bills, where is the cash going?
- Cash flow from operating activities + cash flow from investing activities + cash
flow from financing activities
Return on assets (ROA):
- Important ratio, tells us how well the company did
ROA= Net income / Average total assets
Video lecture 2 (12-04-23)
Chapter 2: Recording Business Transactions
What is an account?
- Assets = liabilities + equity accounting equation
- Each element of the accounting equation contains smaller elements called
accounts
- Account: the detailed record of all increases and decreases that have
occurred in an individual asset, liability, equity, revenue or expense during a
specific period
Double entry accounting:
- Transactions always have 2 impacts on the accounting equation
- These are double entries and keep the accounting equation in balance
,T-account:
- A T-account is a shorted visual form of the more
formal general ledger account format
- Increases are shown on one side of the T-account and
decreases on the other side
- The T-account is balanced at the end of each period
- Debit = left side, Credit = right side
Debits and credits:
- An account with more debits than credits will have a debit balance
- An account with more credits than debits will have a credit balance
- Some accounts will be increased with debits, and some accounts will be
increased with credits
The balancing impact of transactions can be explained using T-accounts and debits
and credits
- When revenues exceed expenses, net income increases owner’s capital
How to record transactions?
- Transaction occurs source documents are prepared transactions are
analysed transactions are journalized and posted
1. Transactions are first recorded using a journal entry account to be debited
is usually written first
2. Next, each amount should be posted to the appropriate T-account
Trial balance:
- The primary purpose of the trial balance is to prove the mathematical equality
of debits and credits after posting
- The amounts come from the individual account balances in the general ledger
- Information for statement of owner’s equity comes from the trial balance AND
from the income statement
Debt ratio:
- Debt ratio shows the proportion of assets financed with debt
- It can be used to evaluate a business’s ability to pay its debts and to
determine if the company has too much debt to be considered financially
‘’healthy’’
Debt ratio = total liabilities / total assets
, Video lecture 3 (13-04-23)
Chapter 3: The Adjusting Process
Difference between cash-based accounting and accrual-based accounting?
Cash based:
- Revenue is recorded when cash is received
- Expenses are recorded when cash is paid
- Not allowed under GAAP
Accrual based:
- Revenue is recorded when it is earned
- Expenses are recorded when incurred
- Generally used by larger businesses
The time period concept:
- Assumes that a business’s activities can be sliced into small segments and
that financial statements can be prepared for specific time periods, such as a
month, quarter, or year
- Any twelve-month period is referred to as a fiscal year
The revenue recognition principle:
- Revenue should be recorded when it is earned
- A good has been delivered or a service has been performed
- The earnings process is complete
The amount of revenues must represent the actual selling price
The matching principle:
- Expenses are matched at the end of the period against the revenues for that
period
- Expenses are recorded when they are incurred during the period
Adjusting entry rules:
- Never involve cash
- Either increase revenue or increase an expense
- Accrued means amount must be recorded
Adjusted journal entries:
- Adjustments to the trial balance are made by recording actual adjusting journal
entries
Adjusting journal entries can be divided into two basic categories:
1. Prepaids: prepaid expenses, unearned revenues
2. Accruals: accrued revenues, accrued expenses
Depreciation:
- Long-lived, tangible assets used to generate revenue are referred to as plant
assets
- Plant assets act like prepaid expenses
- Paid for when acquired, used up over time, used to produce revenues
Depreciation: the process of systematically recording the periodic usage of a plant
asset to generate revenues
- The account used are: depreciation expense, accumulated depreciation
(contra-asset)
- LAND IS NEVER DEPRECIATED
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller ievewillems. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.30. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
78600 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now