Chapter 1: TYPES OF ACCOUNTING:
Accrual accounting means transaction has to be recorded on the day credit sale occurred. Big accounting firm uses it because big companies have many shareholders so to preserve their rights this is used. Cash Basis means transaction has to be recorded when cash is received. Used by small firms. Assets= Liabilities + SE(This equation is always balanced)
Short Term Investments
Long Term Debt
Stock Holders Equity:
Retained earning is a part of Stock Holders Equity.
Paid in Capital.
Net Income= Revenue-Expense (here expense is debit and revenue is credit). Expense includes:Cost of goods sold
Sales revenue is a part of retained earnings, which is a part of stockholder equity. Dividends are also a part of Stockholders equity and are the amount company pays to the stockholders in return of their investments in the company. Dividend is not included while calculating net income of the company. Retained or Beginning Balance + Net Income – Dividends = Final balance (Revenue-Expense)
Chapter 2: Accrual Accounting
Deferrals: It is an adjustment made in case of ADVANCE PAYMENT or ADVANCE SERVICE. Basically anything in advance. Depreciation: Very similar to DEFERRAL but here, only assets are involved. Accruals: Opposite of DEFERRAL. In this case revenue or expense increases over time.
1) Beginning Balance + Sales Revenue – Cash Collections = Ending Balance. 2) Beginning Balance + Cash Payment – Insurance Expense = Ending Balance. 3) Beginning Balance + Other Operating Expense – Cash Payments = Ending Balance Net Working Capital: Total Current Assets – Total Current liabilities Current ratio : Total Current...
Please join StudyMode to read the full document