Accounting 201 Final Study Guide Essay

When are expenses recognized? Name the accounting concepts that answer these questions. What are the four financial statements? What is the purpose for each? Does each report for a period of time or for a point in time? Be able to calculate the change in stockholders’ equity for a period based on information contained in the retained earnings statement. What is GAAP? Who is the body currently responsible for establishing GAAP? What governmental agency has oversight authority over the accounting profession? What is an audit? What is the purpose of an independent audit? Who can perform an audit? What is the sequence of the accounting cycle? Define the following terms related to the accounting cycle: -chart of accounts -journal -ledger -trial balance -adjusting entries -adjusted trial balance -closing entries -post-closing trial balance -posting -journal entry -debit -credit -t-account Be familiar with account classification. What are the five major categories of accounts? What is a contra account? Be able to analyze transactions using the debit/credit rules. What is a compound journal entry? How is an account’s balance determined? What is meant by the term normal balance? Be able to calculate an account balance. When are adjusting entries prepared? Why are they necessary? What are some rules that apply to all adjustments? Review the handout you were give regarding adjusting entries. What do the following accounting concepts mean? -going concern -cost-benefit -materiality -consistency -revenue recognition/realization -matching Which of the accounting concepts listed above form the basis for accrual basis accounting? What are the three closing entries? What is the purpose of closing entries? What is the format for a bank reconciliation? Which reconciling items require that a journal entry be made to recognize them? Be aware of the formulas to calculate some of the commonly used financial ratios, including: -current ratio -working capital -quick ratio How are the following items calculated? -net sales -cost of goods sold What is the difference between a periodic inventory system and a perpetual inventory system? What are internal control procedures? What are the four primary reasons for establishing internal controls? What are some common examples of internal control procedures? Define the following terms with regard to notes receivable/notes payable: -principal -interest -maturity date -maturity value Be able to calculate ending inventory and cost of goods sold under the following inventory cost allocation methods: -average costing -FIFO (first-in, first-out) -LIFO (last-in, first-out) Be able to define the following terms related to long term assets: – cost -residual value/salvage value/trade-in value depreciable cost -book value -service life/useful life -depreciation -accumulated depreciation -depletion -amortization Be able to calculate depreciation using the following methods: -straight line -units of production -double declining balance How is the cost of a group/bundled purchase of assets allocated? What is the difference between the direct write off method and the allowance method of recognizing bad debts? Which one is preferred by GAAP? Why? Be able to define the following terms related to bonds payable: -bond indenture -debenture -secured bond coupon bond -registered bond -convertible bond -callable bond -term bond -serial bond -sinking fund When will a bond sell at a discount? At a premium? Be able to determine the issue price of a bond based on its market price quote. What are the rights of bondholders? Of common stockholders? Of preferred stockholders? Be able to define the following terms related to stock: -common stock -preferred stock -dividends in arrears -par value -treasury stock -dividend declaration date -date of record -dividend payment date -stock dividend -stock split -book value