ACCG101

• General Accepted Accounting Principles (GAAP)

  Principles of accounting established by the Financial Accounting Standards Board (FASB)
• Asset


  Any resource, tangible or otherwise, that is used to provide future benefits to a company
• Liability


  Any future obligation that restricts or encumbers company resources
• Revenue


  Earned resources, whether collected or not, that a Company has claim on from another entity after providing services
• Sales


  Earned resources, whether collected or not, that Company has claim on from another entity after transferring goods
• Expense


  A cost, whether paid or not, that a Company has incurred to help produce revenues or sales
• Red Flags


  Areas of potential concerns where data irregularities occur
• Accruals


  The earning of revenue or using of expenses without the transfer of cash
• Deferrals


  The receipt of cash for services not yet rendered, or the payment of expenses not used
• Double Entry Accounting


  1. When recording a financial transaction, you must have at least one debit and one credit

  2. All transactions must "balance" meaning total debits must equal total credits
• Accounts payable - money owed by the company to its suppliers
• Equity is residual interest in assets of the entity that remains after deducting all its liabilities
• Income statement shows revenues minus expenses over a specific time period
• Balance sheet shows what the company owns (assets) and owes (liabilities)
• Shareholders' equity is divided into two parts - share capital and retained earnings
• Unearned revenues - money paid in advance by customers for goods/services yet to be provided
• Common stock - represents ownership in the corporation
• Treasury Stock - shares repurchased from existing shareholders or issued as part of an employee compensation plan
• Notes Payable: These are short-term loans taken out by the business. Think of it like a personal loan or a credit card debt. The business borrows money from another party, and they promise to pay it back.
• Accounts receivable represent amounts due from customers who have purchased products on credit.
• Dividend Revenue: When a company distributes profits to its shareholders, this revenue is recorded here.
• Retained Earnings: This account reflects the cumulative net income (or loss) of the business over time. It shows how much profit has been retained within the business rather than being distributed to owners through dividends.
• Prepaid Expenses: These are expenses that have been paid in advance but not yet used up. For example, if a company pays its rent for the entire year at once, the first month's worth would be considered a prepaid expense until it is actually used up.
• Interest Expense: This account records interest payments made by the business on any outstanding loans or notes payable.
• Income Tax Expense: This expense reflects the amount paid by the business to the government in taxes based on their income.
• Preferred stock represents ownership in the company but carries priority over common stock when it comes to receiving dividends and assets in case of liquidation.
• Accumulated Depreciation: Accumulated depreciation represents the total amount of depreciation charged against an asset since its acquisition date.
• If a business expects to owe taxes when they file their annual tax return, an amount equal to those expected taxes can be recorded as income tax payable