Case 1-2

Topics: Generally Accepted Accounting Principles, Balance sheet, Asset Pages: 8 (1709 words) Published: June 24, 2013


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If you like the project you can donate bitcoins to: 1E8rQq9cmv95CrdrLmqaoD6TErUFKok3bF ACG 6085 – ADVANCED ANALYSIS OF ACCOUNTING DATA CLASS NOTES – WEEK 1 – MAY 8, 1999

CHAPTER 1 Need for Information – Many users meet the needs for Managerial Vs. Financial

Managerial – More internal (detailed) Uses future and historical (prepare budgets, forecasts, projections and has no set rules) GAAP – Generally Accepted Account Principles (established by FASB) – Revenues are recorded when earned. Financial Statements - End product of financial accounting process liabilities and equity operations) Accounting Equation – Assets – Liabilities = Equity or Assets = Liabilities + Equity Statement Cash Flows – Credit/Debit Financial – More summarized, more historical (past, recorded) Uses GAAP

Balance sheet (assets = liabilities + Equity) - Balances the company’s assets with it

Current Liabilities – long term (mortgage payable) Short term (1 year) ex. A/P, N/P, Wages Payable, Rent Chapter 2 Money Measurement – Everything measured in terms of $ and cents (common denominator) 1/10



Entity Concept – Any activity for which accounting reports are prepared.

Income Statement – Explains how income was earned over a period of time. (result of

RIE – Retained Earnings Statement – Income retained to the next year. Ex. 100,000 in net income, paid 10,000 in income, 90,000 RIE carried over to next year (revenue – expense – dividend) -- Don’t mix and \ match personal and business. Going Concern Concept – Account will continue to operate for an indefinitely long period in the future.

Cost Concept – You maintain the cost of the item. Ex – Land paid $100,000, now worth 1.5 million adhere to cost. You use maintain cost. Dual Aspect Concept – Uses double entry system. (Assets & liabilities/equity) Assets = liabilities + Equity

Chapter 3 Accounting Period Concept – Measures activities for a specified interval of time. All have

In Assets – you increase debits, decrease credits In Liability & Equity – you decrease debits, increase credits

different periods (seasonal) – Timely usually 1 year Conservatism Concept – Record transactions need to be recorded where it has least favorable impact on equity Realization Concept – Revenues should be recognized when earned. Does not mean it will be realized. Matching Concept - Revenues and expenses must be recorded in same period they occurred. Consistency Concept – Once accounting method has be chosen it should use the same method for all subsequent events. Needs to be consistent with GAAP in depreciation. Materiality Concept – Insignificant events may be disregarded, but must have full disclosure. (Ex – 5- 10% net income / ½ percent of total assets




Here is some of the homework compliments of other members in your class.

1 Accounting information - Kim Fuller The initial cash investment. The cost of each asset placed in service: the used truck, the three trailers, the used grinding machine, the new grinding machine, the computer and software, cost of supplies and parts inventory, and, purchase price of the warehouse. The amount invested by each sibling. The down payment on the warehouse. The amount of the loan for the warehouse.

1 Nonaccounting information - Kim Fuller Inception date of business for tax purposes. A contact list of customers, vendors and employees. A contact list of investors, including terms of repayment. An amortization schedule of the notes payable, including terms of repayment. Title and ownership documentation of assets purchased. Occupational and business licensure information. Documentation of...
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