NOTES. ACCG100: Accounting 1A. Macquarie University. Check spoonfeedme.com for free video summaries, notes & cheat sheets by top students.

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1 NOTES ACCG100: Accounting 1A Macquarie University

2 Table of Contents 1 ROLE OF ACCOUNTING USERS OF ACCOUNTING INFORMATION ASSUMPTIONS OF FINANCIAL ACCOUNTING QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION STRUCTURE OF BUSINESS ENTITIES SOLE PROPRIETORSHIP/ SOLE TRADER PARTNERSHIP COMPANY/CORPORATION (LIMITED LIABILITY) ACCOUNTING EQUATION ASSETS LIABILITIES SHAREHOLDERS EQUITY 6 2 FINANCIAL STATEMENTS AND ACCOUNTING ASSUMPTIONS BALANCE SHEET INCOME STATEMENT STATEMENT OF CASH FLOWS 8 3 RECORDING TRANSACTIONS ACCRUAL ACCOUNTING CASH ACCOUNTING ACCOUNTING EQUATION IN DETAIL DOUBLE ENTRY ACCOUNTING THE ACCOUNTING CYCLE 10 4 ADJUSTING ENTRIES AND PREPARING FINANCIAL STATEMENTS ACCRUAL ADJUSTMENTS STEP 5 AND EXPIRATION OF ASSETS UNEARNED REVENUE ACCRUAL OF UNRECORDED REVENUE ACCRUAL OF UNRECORDED EXPENSES CONTRA ACCOUNTS ALLOWANCE FOR DOUBTFUL DEBT 13 5 COMPLETING THE ACCOUNTING CYCLE WORKSHEETS CLOSING ENTRIES POST CLOSING TRIAL BALANCE PREPARE FINANCIAL STATEMENTS BALANCE SHEET INCOME STATEMENT CASH FLOW STATEMENT 16 6 ACCOUNTING SYSTEMS SPECIAL JOURNALS SALES JOURNAL 17

5.3 SHAREHOLDERS EQUITY 6 2 FINANCIAL STATEMENTS AND ACCOUNTING ASSUMPTIONS 7 2.1 BALANCE SHEET 7 2.2 INCOME STATEMENT 7 2.3 STATEMENT OF CASH FLOWS 8 3 RECORDING TRANSACTIONS 10 3.

3 6.2 PURCHASES JOURNAL CASH RECEIPTS JOURNAL CASH PAYMENT JOURNAL 18 7 CASH MANAGEMENT AND CONTROL PETTY CASH FUND BANK RECONCILIATION 19 8 ACCOUNTING FOR RETAILING AND INVENTORY PERPETUAL INVENTORY SYSTEM PURCHASES PURCHASE RETURNS AND ALLOWANCES SALES SALES RETURNS OR ALLOWANCES PERIODIC INVENTORY CONTROL SYSTEM PURCHASES PURCHASE RETURNS AND ALLOWANCES SALES SALES RETURNS AND ALLOWANCES MEASURING INVENTORY FIFO LIFO WEIGHTED AVERAGE COST METHOD 23 9 ACCOUNTING FOR RECEIVABLES ALLOWANCE FOR DOUBTFUL DEBT ACCOUNTING FOR DEPRECIATION DEPRECIATION METHODS OF DEPRECIATION: SUBSEQUENT COSTS REPAIRS AND MAINTENANCE COSTS EXPENSED IMPROVEMENTS AND MODIFICATIONS ETHICS ETHICS SIX PILLARS OF CHARACTER ETHICAL THEORIES 28

2 PERIODIC INVENTORY CONTROL SYSTEM 23 8.2.1 PURCHASES 23 8.2.2 PURCHASE RETURNS AND ALLOWANCES 23 8.2.3 SALES 23 8.2.4 SALES RETURNS AND ALLOWANCES 23 8.3 MEASURING INVENTORY 23 8.3.1 FIFO 23 8.3.2 LIFO 23 8.

4 1 Role of Accounting 1.1 Users of Accounting Information Users of accounting information are the people that depend on and use the financial information (provided by financial statements) to make economic decisions. 1.2 Assumptions of Financial Accounting Assumptions are the tools and principles that we assume accountant will always use when presenting and creating financial statements Relevant assumptions: Accrual Accounting Measure the performance and position of a company by recognising economic events regardless of when cash transactions occur. Going Concern A business will continue to operate for the foreseeable future Monetary Unit - Measured in common denominator Accounting Period Discrete equal periods Historical Cost Cost at initial acquisition 1.3 Qualitative Characteristics of Accounting Information Understandability Relevance Reliability Materiality Fair representation (represent what really existed/happened) Neutrality (freedom from bias) Substance over form (reflects the economic reality) Prudence (caution in estimates) Completeness (material info not omitted, not misleading) Comparability 1.4 Structure of Business Entities Sole Proprietorship/ Sole trader The owner is called the proprietor Separate accounting entity Not separate legal entity

2 Assumptions of Financial Accounting Assumptions are the tools and principles that we assume accountant will always use when presenting and creating financial statements Relevant assumptions:

5 Not separate taxable entity Unlimited liability - owner personally liable for debts of business Partnership Separate accounting entity Not separate legal entity Not separate taxable entity Unlimited liability - individual partners personally liable for debts of partnership Company/Corporation (limited Liability) The owners are called the shareholders Separate accounting, legal and taxable entity Limited liability - shareholders personally liable up to the value of their shares 1.5 Accounting Equation A = L + SE Assets Definition: Resources controlled by an entity. Ability to provide future economic benefit. As a result of a past event/transaction. Recognition: Probability item is recognised if it is probable that any future economic benefit associated with the item will flow to or from the entity i.e. more likely than less likely, not absolute certainty. AND Reliably measured item is recognised if it has a cost/value/$ figure that can be measured with reliability i.e. if item arises from a transaction and hence, possesses a cost Liabilities Definition: Present obligation of an entity. As a result of a past event/transaction. Expected to result in an outflow of resources of economic benefit

3 Company/Corporation (limited Liability) The owners are called the shareholders Separate accounting, legal and taxable entity Limited liability - shareholders personally liable up to the value of

6 Recognition: Probability item is recognised if it is probable that any future economic benefit associated with the item will flow to or from the entity i.e. more likely than less likely, not absolute certainty. AND Reliably measured item is recognised if it has a cost/value/$ figure that can be measured with reliability i.e. if item arises from a transaction and hence, possesses a cost Shareholders Equity Definition: Residual interest in the assets. After liabilities have been deducted.

AND Reliably measured item is recognised if it has a cost/value/$ figure that can be measured with reliability i.e. if item arises from a transaction and hence, possesses a cost.

7 NOTES MATH1002: Linear Algebra The University of Sydney Sign up to get a free cheatsheet and view more videos and notes.

NOTES. ACC1000: Principles of Accounting and Finance. Monash University

NOTES. ACC1000: Principles of Accounting and Finance. Monash University NOTES ACC1000: Principles of Accounting and Finance Monash University Table of Contents 1 ACCOUNTING IN ACTION 5 1.1 USERS OF ACCOUNTING INFORMATION 5 1.2 ASSUMPTIONS OF FINANCIAL ACCOUNTING 5 1.3 QUALITATIVE