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Week 2 Accounting
OSU
| Question | Answer |
|---|---|
| Accrual Accounting | Based on (GAAP) Realization Principle Matching Conept |
| Realization Principle | Earning Process is Consider complete when Goods/Services are sold " the exchange of cash is not necessary to record revenue" Good/Services administered is enough to record revenue |
| Matching Concept | Record Expense the same period that it helps generate revenue |
| Accrual Accounting must be used by Who? | Any company that sells Securities(stock) to the Public *Most often need to receive a loan from a bank if you are a company " |
| Cash Accounting | Record when: Received Cash (Revenues) Paid Cash (Expenses) |
| Account | Place where all increases and decreases are recorded |
| T account Left and Right Side? | Left Debt , Right Credit Debt>Credit = record on Debt side |
| Asset: Increase, Decrease, Normal Balance | Debt,Credit,Debt |
| Liability: Increase, Decrease, Normal Balance | Credit,Debit,Credit |
| Equity: Increase, Decrease, Normal Balance | Credit,Debit,Credit |
| Revenue: Increase, Decrease, Normal Balance | Credit,Debit,Credit |
| Expense: Increase, Decrease, Normal Balance | Debt,Credit,Debt |
| Accounting Transactions | Economic events that require recording in financial statements "Note: Because they result in a change in ALE" |
| Ledger | All accounts of the company taken together "Note: think of ledger as all the T-Accounts of the Company" |
| Journal | The Place where all the accounting transactions are initially recorded |
| Journal Entry | The means used to record transitions of the journal |
| Double Entry Accounting | Every entry must have a Debt and a Credit "Note: Debts MUST = Credits" |
| Posting | Process of transferring Debt to Credit amounts from Journal to ledger "Note: Entries to T-Accounts |
| Gains | Sell an Asset other then Inventory Selling price>Cost |
| Losses | Sell an Asset other than Inventory Selling price<Cost |
| Contra Equity | Dividends It Reduces Retained Earnings |
| Trail Balance | Primary Purpose of the trail balance is to Prove debts=credits after posting "Note: List of accounts and their balances are the given time" |
| Accounting Cycle: Start to Finish | 1) Journal, Record Transaction in journal 2) Ledger, Post debt and credit amounts from journal to the ledger 3) Trail Balance, Prepare trail balance 4) Financial Statements |
| Financial Statement Analysis | Examination of Both the relationships among financial statement numbers and the trends in those numbers over time. |
| Purpose of Financial statement analysis | 1) Use the past performance of the company to predict how it will do in the future 2)Evaluate the performance of a company with a eye toward identifying problem areas |
| Financial Ratios | Used by investors and creditors to help them make decisions. |
| Typical Benchmarks or Comparison Points: | Other Company Industry Averages Past years (Trend Analysis) |
| Liquidity Ratios | 1) Working Capital 2) Current Ratio "Note: Short-term ability to pay debts as they come due" |
| Working Capital | Assets (Current) - Liabilities (Current) "Form of Dollar Amount" |
| Current Ratio | Assets (Current) / Liabilities (Current) "Form of Pay short-term debts X-times using current assets" |
Created by:
Elzbane
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