Read the summary and the most important questions on Financial and Managerial accouting

• 1 Week 1

• 1.2 Mijn lesaantekeningen

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• What are internal users ?

  The different departments in a organization

• Who are external users in a company?

  Those who put money in the organization. Exp investors, creditors etc.

• What are the three building blocks of accounting?

  • Ethics
    
  • Principles 
  • Assumptions

• What does historicle cost principle (cost principle) do ?

  It dictates that companies record at their cost ( For example if Best Buy purchases land for $360,000, the company initially reports it in its accounting records at $360,000. But what does Best Buy do if, by the end of the next
  year, the fair value of the land has increased to $400,000? Under the historical cost principle,
  it continues to report the land at $360,000)

• Which two main assumptions are important for the accounting process?

  • The Monetary Unit Assumption
    
  • Economic entity Assumption

• What does Stockholders equity consists of?

  Common stock and retained earning 
  Ownership claim on total assets

• How do you calculate Retained earning?

  Retained earning begining - Net income - Dividends= retained earnings

• What are the four important finacial statements used in accounting?

  1. Income statement
     
  2. Retained earning statement
  3. Balance sheet
  4. Statement of cashflows 

• 3 Chapter 3 adjusting the accounts

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• what does Accrual-basis accounting do?

  • Transactions recorded in the periods in which the events occur.  
  • Companies recognize revenues when they perform services (rather than when they receive cash). 
  •  Expenses are recognized when they occur (rather than when paid).

• Why adjusting entries ?

  · Report on the statement of financial position the appropriate Assets, Liabilities, and Equity at the statement date.
  · Report on the income statement the proper revenues and    expenses for the period.
  · Revenues are recorded in the period in which they are earned.  
  · Expenses are recognized in the period in which they are incurred (in which they occur).