Indicate to which category of elements of financial statements it belongs:
Loss on sale of equipment Losses
Indicate the financial statement on which this account would be reported.
Accumulated Depreciation Balance Sheet
Indicate the financial statement on which this account would be reported.
...
Indicate the financial statement on which this account would be reported.
Dividends ✅Retained Earnings Statement
Indicate the financial statement on which this account would be reported.
Service Revenue ✅Income Statement
Indicate the financial statement on which this account would be reported.
Supplies ✅Balance Sheet
Indicate the financial statement on which this account would be reported.
Accounts Payable ✅Balance Sheet
Is this account included in a post-closing trial balance?
Accumulated Depreciation ✅Included
Is this account included in a post-closing trial balance?
Depreciation Expense ✅Not Included
,Is this account included in a post-closing trial balance?
Retained Earnings (ending) ✅Included
Is this account included in a post-closing trial balance?
Dividends ✅Not Included
Is this account included in a post-closing trial balance?
Service Revenue ✅Not Included
Is this account included in a post-closing trial balance?
Supplies ✅Included
Is this account included in a post-closing trial balance?
Accounts Payable ✅Included
Definition:
Information that is capable of making a difference in the decision-making outcome.
✅Relevance
Definition
Information to help users form expectations about the future. ✅Predictive Value
Definition:
Information that confirms or corrects prior expectations based on previous evaluations.
✅Confirmatory Value
Definition:
Information is material if omitting it or misstating it could influence decisions of the
users. Materiality is very hard to quantify. A company may consider whether the
information is material based on the nature and/or magnitude of the item(s).
✅Materiality
Definition:
Do the numbers and descriptions match what really happened or existed? ✅Faithful
Representation
Definition:
All information necessary is provided. Omission causes information to be misleading or
false. ✅Completeness
,Definition:
Information is unbiased-this is the overriding consideration. Do not give one set of
information to stockholders and another to lenders. ✅Neutrality
Definition:
Information is accurate but does not mean total freedom from error. Estimates are used
to predict uncollectible accounts, useful life of assets. ✅Free from Error
Definition:
complement the fundamental qualities ✅Enhancing Qualities
Definition:
Companies record and report information in a similar manner. Consistency is another
type of comparability in that a company uses the same accounting methods from one
period to the next. We will discuss the impact of the need to change accounting
methods so that consistency/comparability is maintained. ✅Comparability
Definition:
Independent people using the same methods arrive at similar conclusions. Examples:
two independent auditors would arrive at the same inventory figure if using the same
period of inventory. ✅Verifiability
Definition:
Information is available before it loses its relevance. Information provided a year after
the close of the accounting cycle is not as relevant for decision- making. ✅Timeliness
Definition:
Reasonably informed users should be able to comprehend information that is classified,
characterized, and presented clearly and concisely. ✅Understandability
Definition:
Probable future economic benefits as a result of past events (Debit part of the equation)
✅Assets
Definition:
Probable future sacrifices of benefits arising from obligations to transfer assets or
provide services (Credit part of the equation) ✅Liabilities
Definition:
Residual interest in assets remaining after deducting liabilities. In a business, this is the
ownership interest. (Credit part of the equation). ✅Equity
Definition:
, Purchase of ownership by giving assets to business entity. May involve providing
services or conversion of liabilities owed to stock. ✅Investments by Owners
Definition:
Distribution to owner decreased ownership interests or equity. Most often in form of
dividends. Can also arise from the transfer of assets or rendering services
✅Distribution to Owners
Definition:
Change in equity or net assets during a period from events from nonowner sources. It
includes changes in equity that do not involve investments by owners or distributions to
owners. ✅Comprehensive Income
Definition:
Inflows of assets of an entity or settlement of liabilities (unearned revenues) from
delivering or producing goods, services, or activities from the ongoing major operations.
✅Revenues
Definition:
Outflows using assets or incurrence of liabilities from delivering or producing goods or
services, carrying on other activities from the ongoing major operations. ✅Expenses
Definition:
Increase in net assets (equity) from peripheral or incidental transactions of an entity.
Example: Gain from sale of property, plant and equipment. ✅Gains
Definition:
Decrease in net assets (equity) from peripheral or incidental transactions of an entity.
Example: Loss from sale of property, plant and equipment. ✅Losses
Definition:
Certain assumptions are important to understanding the manner of data presentation.
✅Assumptions
Definition:
Assumes that the company is separate and distinct from its owners or other business
units. ✅Economic Entity
Definition:
A company is assumed to have a long-life. Thus, the company uses the historical cost
principle. If liquidation of entity appears imminent, this assumption is not used and
assets would be restated. ✅Going Concern Assumption
Definition:
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