ACCT 201 – FINALS Study Guide
Ch. 1 – 3 questions
○ 1 discusses: deals with an expense anything and everything -> effects ○ 2 change tells you where the change is deals with earth: A = L + O/E goes up & down ○ 3 Revenue recognition
■ On what date is revenue earned
Conceptual expenses > pieces of financial statement
Revenues & expenses in INCOME STATEMENT
Revenues – Expenses = Net income/loss
Assets = Liabilities + Owner/Stockholder’s Equity
Revenue condition on what date is revenue earned? Revenue – expenses = net income/loss. Revenue recognition principle requires that companies recognize revenue in the accounting period in which it is EARNED. In a service company, revenue is considered to be earned at the time the service is PERFORMED.
Ch. 2 – 3 q’s
● Leave to the end, several computation
○ Under accrual basis accounting, what is the corporation’s net income for the year? ● Discount sales, 2 net 30
○ What is the implied interest rate?
● How many units in ending inventory
○ Have to figure out using FIFO, LIFO or average, figure out what the ending inventory is. Computational based on accrual bases of acting. What is company’s net income for the year? Harden Co earned 39k in revenue and received 33k cash from customer. The Co. incurred expense of 22.5k but had not paid 2,250 of them at year end. Harden prepaid 3,750 cash for expenses that would be incurred the next year. Calculate the first year’s net income under both cash basis and accrual basis of accting. [pic]
Accrual-basis acting means that transactions that change a company’s financial statements are recorded in the periods in which events occur even if cash was not exchanged. Companies recognize revenues when earned (revenue recognition principle), even if cash was not received. Likewise under the accrual basis, companies recognize expenses when incurred (matching principle), even if cash was not paid.
Given 2/10 net 30 or 2/10 n/30
What is the implied annual interest rate?
2% discount with 10 days, otherwise pay within 30 days or 2% cash discount may be taken on the invoice price less (“net of”) any returns or allowances, if payment is made within 10 days of the invoice date (the discount period). Otherwise, the invoice price, less any returns/allowances is due 30 days from the invoice date.
How much is allocated in the ending inventory? Use LIFO/FIFO/AVG.
Refer to PAGE 1
Ch. 3 – 2 q’s
● No computation: Internal control
● Computational one – gives you facts/bunch of numbers, calculate the company’s revenue for the year
- Control environ: responsibility of top manager to make clear that org values integrity and unethical activity not tolerated “tone at top” - Risk assessment: identify/analyze various factors that create risk for biz and determined how to manage them - Control activities – reduce occurrence of fraud, management design policies/procedures to address specific risks faced by company - Information of comm – internal control system capture/comm all pertinent info both down and up org, as well as comm info to appropriate external parties - Monitoring – internal control systems must monitor periodically for adequate significant deficiencies need to be reported to top management PRINCIPLES
- Establishment of respon: assign respon to specific employee, control is most effective when only one person is respon for a given task - Segregation of duties: 2 applications
o Different indiv respon for related activities
o Respon for recordkeeping for an asset should be separate from physical custody of asset -- work for one employee should without duplication of effort provide reliable basis for eval work of another employee
1 - making 1 indiv respon for related acti increase potential for error
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