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Accounting Exam I


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Examp[les of Deferred revenue
unearned revenue, fees, tuition, premiums in advance, mag subscriptions
Examples of Deferred expenses
prepaid ins., prepaid advertising, prepaid interest, supplies
Examples of Accrued revenues
fees for services that an attorney did for a client-whom bills the atty the end of the period, rent on property rented to others
Examples of Accrued expenses
accrued interest on notes receivable, accrued at end of period, accrued utility expenses and taxes
Classified Balance Sheet: current asset
Any asset that is expected to be cash/sold/used up within 1 year
Classified Balance Sheet: fixed assets(long term):
physical assets that are long term
Classified Balance Sheet: total assets
Classified Balance Sheet:current liabilities
liabilites due within 1 year-notes payable and accounts payable are most common types
Classified Balance Sheet:long term liabilites
Liabilites due longer than 1 year--assets are used as collateral (mortgage not payable or mortage payble) until debt is paid
Classified Balance Sheet: total equity
Stockholders equity
stockholders rights to the assets of the business. Corporation-stockholders equityconsists of captaial stock and retained earnings. the stockholders equity section of the Class.Bal.Sheet reports each of these two financial statement accounts separtely
CRIME: Elements of internal control:control environment
the overall attitudes of management and employees concerning internal controls...includes management philosophy and operating style, organizational structure, and personnel policies
CRIME: Elements of internal control: risk assesment
Does the business face lots of risks including⬦ competition, customer and employee theft, increased governmental regulation? These must be identified. Then, internal control procedures must be put in place to minimize these risks.
CRIME: Elements of internal control: control procedures
are established to minimize risk and ensure that business goals (including the prevention of fraud) will be achieved***Hire competent personnel, separate related duties or operations, implementing proofs and security measures, mandate vacations for all employees.
CRIME: Elements of internal control: monitoring
Once internal controls are put in place, they must be monitored to locate weaknesses and improve control effectiveness
CRIME: Elements of internal control:information and communication
management needs feedback from employees regarding significant observations as well as new regulatory changes that might affect the business.
8. Be able to define cash and cash equivalents and show how they are reported on the balance sheet
cash equivalents:us tresury bills, notes issued by major corps. and money market funds. companie that have invested excess cash in cash equivalents usually reports "cash and cash equivalents as one amount on the balance sheet.
state the overall acounting equation
Liabilites + stock holders equity = Assets
resources owned by a business- cash, accounts receivable, inventory, raw materials, investments, property, equipment, intangibles
anything a company owes to anybody- Bils, money owed to vendors and suppliers, payroll, short term loans, mortgage
capital, any debt owed to business owners- capital stock, retained earnings, repurchased stock
distribution of earning to stock holders, recorded in retained earnings as a deductions
increase in assets from selling products or services- sales(selling products) or fees earned (prodviding service)
cost incurred to earn revenue, always decrease equity- cost of merchandise sod/supplies expenses, rent, wages, uitilities, misc.
Be able to identify the three types of businesses.
manufacturer merchandiser service
Be able to identify the four organizational forms of businesses.
proprietorship: partnership: corporations: (stockholders) limited liability company: (members)
Be able to identify the two business emphases (strategies).
low cost premium pricing
Be able to identify business stakeholders (internal and external).
internal: employees/managers external: customer, bank, suppliers, government, CMS
Be able to identify the three primary business activities and give an example of each.
Financing investing operating

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