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Basic Accounting Reviewer Cangage

This document provides an overview of introductory accounting concepts. It discusses the purpose of accounting as providing financial information to stakeholders and the accounting process of gathering, recording, classifying, summarizing, reporting and interpreting financial data. It also describes generally accepted accounting principles, types of business entities and activities, accounting careers, and the key elements of the accounting equation - assets, liabilities, and owner's equity. Finally, it introduces how business transactions are analyzed and recorded using the double-entry method and how this information is then used to prepare financial statements.

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Renz Rayark
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19 views

Basic Accounting Reviewer Cangage

This document provides an overview of introductory accounting concepts. It discusses the purpose of accounting as providing financial information to stakeholders and the accounting process of gathering, recording, classifying, summarizing, reporting and interpreting financial data. It also describes generally accepted accounting principles, types of business entities and activities, accounting careers, and the key elements of the accounting equation - assets, liabilities, and owner's equity. Finally, it introduces how business transactions are analyzed and recorded using the double-entry method and how this information is then used to prepare financial statements.

Uploaded by

Renz Rayark
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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---Chapter 1: Introduction to Accounting---

I. Purpose of Accounting
- To provide financial information about the current operations and financial
condition of a business to individuals, agencies, and organizations
II. Users of Information
- Owners
- Managers
- Creditors
- Government Agencies
III. The Accounting Process
Accounting is a system of:
- Gathering financial information about a business and
- Reporting this information to users
Steps:
1. ANALYZING- Looking at events that have taken place and thinking about how
they affect the business
2. RECORDING- Entering financial information about events into the accounting
system
3. CLASSIFYING- Sorting and grouping similar items together rather than merely
keeping a simple, diary like record of numerous events
4. SUMMARIZING- Aggregation of many similar events to provide information that
is easy to understand
5. REPORTING- Telling the results; Using tables of numbers is common
6. INTERPRETING- Deciding the meaning and importance of the information in
various reports
IV. Generally Accepted Accounting Principles (GAAP)- by the FASB
- Procedures and guidelines to be followed in the accounting and reporting
process
- How FASB developed GAAP
1. Identify an accounting issue
2. Place the issue on the FASB’s agenda
3. Research the issue
4. Issue a Preliminary Views document to identify pros and cons of
treatments
5. Hold public hearings
6. Issue an exposure draft
7. Consider feedback on the exposure draft
8. Issue a final Accounting Standards Update which amends the FASB
Accounting Standards Codification
V. Business ownership structures
- Sole proprietorship
- One owner
- Owner assumes all risk
- Owner makes all decisions
- Partnership
- Two or more owners (partners)
- Partners share risks
- Partners may disagree on how to run the business
- Corporation
- Owned by stockholders
- Stockholders have limited risk
- Stockholders may have little influence on business decisions
VI. Types of Business activities
- Service business- A business that provides a service
- Merchandising business- A business that buys a product from another business
to sell to customers
- Manufacturing business- A business that makes a product to sell
VII. Career opportunities in Accounting
- Accounting Clerks
- Bookkeepers and Para Accountants
- Accountants

---Chapter 2: Analyzing Transactions- The accounting equation---

I. The accounting elements


- Business Entity
- An individual, association, or organization that engages in economic
activities and controls specific economic resources
- The business entity’s finances are kept separate from the owner’s
nonbusiness assets and liabilities (business entity)
- Assets
- Items owned by a business that will provide future benefits.
- Liabilities
- Something owed to another business
- A probable future outflow of assets as a result of a past transaction or
event.
- Owner’s Equity
- Amount by which the business assets exceed the business liabilities.
- Types:
1. Revenue- The amount a business charges customers for products
sold or services performed
2. Expenses- Represent the decrease in assets (or increase in
liabilities) as a result of efforts made to produce revenues
3. Drawing- The owner taking (withdrawing) cash or other assets
from the business for personal use
4. Investment
II. The accounting equation
Assets = Liabilities + Owner’s Equity
- Assets : The left side shows the assets.
- Liabilities + Owner’s Equity: The right side shows where the money came from to
buy the assets.
III. Analyze business transactions
- Business Transaction- An economic event that has a direct impact on the
business that has monetary value
- Account- A separate record used to summarize changes in each asset, liability,
and owner’s equity of a business.
- Analyzing the transactions answers:
- What happened?
- Which accounts are affected?
- How is the accounting equation affected?
IV. Showing the Effects of transactions
- Net Income- revenue is greater than expense
- Net Loss- expense is greater than revenue
V. Concepts
- Accounting Period Concept- The concept that income determination can be
made on a periodic basis (month, quarter, year, etc.)
- 12 months is a fiscal year
-
VI. Financial Statements
- Three commonly prepared financial statements
1. Income statement- Reports the profitability of business operations for a specific
period of time; aka “Also called the profit and loss statement” or “operating
statement”
2. Statement of owner’s equity- Reports the activities that affected owner’s equity
for a specific period of time; Uses Net Income from the income statement
3. Balance sheet- Reports a firm’s assets, liabilities, and owner’s equity on a
specific date; aka “Also referred to as a “statement of financial position” or
“statement of financial condition”
VII. Accounting Phases
- Input- Transactions provide the necessary input
- Processing- Identifies then classifies account and enter the balance
- Output- Financial statements

---Chapter 3: the Double Entry Framework---

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