Financial Accounting Cheat Sheet

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Basic Objectives
To allow better allocations of Capital market Ressources(Useful to those making invest and credit decisions ( Provide info: economic resour, claims and changes

Fundamental Concepts

Relevant - Past, Present, Future Events ( Reliable - Dependable, Reasonably Free Of Error ( Verifiable ( Comparable to other entities ( Consistent over time

Recognition And Measurement Concepts

Economic entity ( Going concern ( Monetary unit ( Periodically

Basic Principles

Historical cost ( Accrual basis (recognize when goods are sold or service rendered) Revenue recognise when realised ( Matching principle ( Full disclosure

Constraints

Cost/Benefit ( Materiality ( Industry practice ( Conservatism

Abbreviations

|B.P. Bond |APIC Additional |
|Payable |PIC |
|C.S. Common |PMR Profit Margin |
|Stock |Ratio |
|CSE Common SE |PV Present Value |
|EOF End of |R.E. Retained |
|Financing |Earnings |
|(Period) |S.H. ShareHolder |
|FV Future Value |S.E. ShareHolder |
|IE Interest |Equity |
|Expense |SYD Sum of the |
|I.S. Income |Years’ Digits |
|Statement |TA Total Assets |
|FS Financial |TAT Total Assets |
|Statements |Turnover |
|LCM Lower Cost &|XA Uncollectable |
|Market |Accounts |
|M.S. Marketable |~A Contra-Asset |
|Securities |(negative) |
|N.I. Net Income |$ |
|PIC Paid In |CASH |
|Capital. | |

Balance sheet

|Assets |Liabilities |
|Current Assets |Current |
|Cash |Liabilities |
|Marketable |Payable (Account,|
|Securities/Stock|Note,Interest, |
|s |Salaries, Income |
|Short Term |Tax) |
|Investment |Advanced From |
|Receivables(Acct|Customer |
|, note,interst) |Rent Received In |
|Inventories |Advance |
|Advances To |Non-Current |
|Supplier |Liabilities |
|Prepaid |Bonds Payable |
|Insurance, Rent |Mortgage Payable |
|Non Current |Deferred Income |
|Assets |Taxes |
|Investment In |Shareholders' |
|Securities |Equity |
|Land, Buildings |Common Stock |
|& Equipment |Preferred Stock |
|Accumulative |Capit. Contribut |
|Depr (~A) |In Excess Of Par |
|Leasehold |Val. |
|Patent (Only If |Retained Earnings|
|Purchased) |Treasury Shares |
|Goodwill | |

Recognition – recorded and reflected in the FS

Assets Recognition

• Firm has acquired rights to use in the future as a result of a transaction • Future benefits are measurable or quantifiable

Assets Valuation

• Monetary Assets at NPV
• Non-Monetary Assets at Acquisition cost (part adjusted for depreciation)

Revenue recognition

• Firm has performed all or most of the service or has received $ or equivalent

Expense recognition

• If a particular revenue causes an asset expiration or an asset exprires

Liquid Assets

Cash

Marketable Securities

• Investment of current cash excess,convertible to cash and Firm intend to convert them within a year

Accounts receivable – JE 52

Fixed Assets

Acquisition cost - Include all relevant charges

Self-construct - Capitalise interest during construction

Depreciation - Allocates cost of assets to periods of use

Land - Do not depreciate

Buildings - Salvage = 0

Changes in Depreciation

• Spread remaining undepreciated balance less new salvage value over new remaining life

Repair & Maintenance

• Expense

Improvement

• Capitalise & amortise.

Retirement

• Bring depreciation up to sale date

Patent (17 year), Goodwill

• Capitalise if purchased, then amortise.

Liabilities

Definition

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