Do not want to open the book? In less than 30 (airy) pages, this summary contains all the core definitions, models and theories to obtain an 8 for this course.
Too bad you're not satisfied, Caroline. What are you missing in the summary? I got from this base in combination with fiks practicing an 8.5.
Seller
Follow
aaantjes
Reviews received
Content preview
CHAPTER 1 – ACCOUNTING IN BUSINESS
Parts of Accounting:
- Identifying – select transactions and events
- Recording – input, measure and classify
- Communicating – Prepare, analyze and interpret
Users of Accounting Information:
- Internal – officers, managers, internal auditors, sales staff etc.
- External – lenders, shareholders, government, external auditors etc.
STANDARDS
Regulators:
- Securities and Exchange Commission (SEC), the US regulator
o FASB – sets US GAAP standards (Generally Accepted Accounting
Policies)
Required for US SEC registrants
o IASB – sets IFRS standards (International Financial Reporting
Standards)
Non-US SEC registrant can opt for either US GAAP or IFRS
- Autoriteit Financiële Markten (AFM), the NL regulator
The FASB and IASB are attempting to converge and enhance the conceptual
framework that guides standard setting.
ACCOUNTING PRINCIPLES
- Measurement principle (or Cost principle) – actual cost, with a
potential subsequent adjustments to market. (‘fair value’ is covered later
on)
- Revenue Recognition principle – when to recognize (record) revenue:
o When earned (when good is transferred or services are provided).
Not sooner, later.
o Need not be in cash – can also be credit sales.
o Measured by cash received + the cash value of any other items
received
- Expense Recognition principle (or Matching principle) – record
expenses incurred to generate the revenue reported. Key to modern
accounting.
- Full Disclosure principle – report the details behind financial statements
that would impact users’ decisions. Often in footnotes to statements.
1 | Page
264678721 Anne Aantjes
, ACCOUNTING ASSUMPTIONS
- Going-concern assumption – valuation without presumption of business
to close of be sold. Thus valuation on cost instead of, say, liquidation
values.
- Monetary unit assumption – express transactions and events in
monetary (or money) units.
- Time period assumption – period on which is accounted/reported, e.g.
months, quarters, years.
- Business entity assumption, one of three legal forms (US):
o Sole proprietorship – one owner
o Partnership – two or more partners
(Both proprietorships and partnerships are mostly LCCs)
o Corporation – these involve shareholders
ACCOUNTING CONSTRAINTS
- Materiality constraint – only information that would influence the
decisions of a reasonable person need to be disclosed.
- Cost-benefit constraint – only information with benefits of disclosure
greater that the costs of providing it, need to be disclosed.
SARBANES-OXLEY (SOX)
Intended to curb financial abuse. To increase transparency, accountability ad
truthfulness.
Requires public (listed) companies to implement:
- Accounting oversight
- Stringent Internal Controls
ACCOUNTING EQUATION
Assets = Liabilities + Equity (Bezittingen = Schulden + Eigen Vermogen)
- Assets – resourced owned / controlled, expected to yield future benefit.
- Liabilities – creditors’ claim on assets.
- Equity – owner’s claim on assets.
o Owner Capital (+)
o Owner Withdrawals (-/-)
o Revenues (+)
o Expenses (-/-)
2 | Page
264678721 Anne Aantjes
, Net income: revenues > expenses, resulting in a increase in Equity.
Net loss: revenues < expenses, resulting in a decrease in Equity.
VARIOUS EXAMPLES, PAGE 15-18
FINANCIAL STATEMENTS (REQUIRED UNDER IFRS)
1. Income Statement (Winst & Verlies rekening) over a period of time:
a. Revenues,
b. Expenses, and the resulting
c. Net income / loss
2. Statement of Owner’s Equity - Change in equity over a period of time
from
a. Net income (or loss), and from,
b. Owner investments / withdrawals
3. Balance Sheet (Balans) - Financial position at a point in time:
a. Assets
b. Liabilities
c. Equity
4. Statement of Cash Flow (Kasstroom overzicht), over a period of time:
a. Cash inflows (receipts)
b. Cash outflows (payments)
3 | Page
264678721 Anne Aantjes
, CHAPTER 2 – ANALYZING AND RECORDING TRANSACTIONS
ANALYZING AND RECORDING PROCES
General ledger (overview of all accounts, balans)
- Asset Accounts
o Cash
o Accounts receivable
o Note receivable (formal, e.g. contract etc)
o Prepaid accounts / Prepaid expenses
o Supplies
o Equipment
o Buildings
- Liability Accounts
o Accounts payable (oral)
o Note payable (formal)
o Unearned revenues (advance payments, goods/services to be
delivered)
o Accrued liabilities (wages payable, interest payable etc)
- Equity Accounts
‘Owners Equity’
Asset Accounts – Liability Accounts
o Owner’s capital
o Owner’s withdrawals
o Revenues (P&L, plus)
o Expenses (P&L, minus)
ANALYZING AND PROCESSING TRANSACTIONS
ASSETS = LIABILITIES + EQUITY
DEBIT CREDIT DEBIT CREDIT DEBET CREDIT
increas decrea decrea increas decreas increas
es ses ses es es es
+ -/- -/- + -/- +
ASSETS = LIABILITIES + EQUITY, where EQUITY is:
OWNER -/- OWNER + REVENUES -/ EXPENSES
CAPITAL WITHDR. -
DEBIT CREDI DEBIT CREDI DEBIT CREDI DEBIT CREDI
T T T T
decr. incr. decr. incr. decr. incr. incr. decr.
-/- + + - -/- + + -
VARIOUS EXAMPLES, PAGE 59-63
TRIAL BALANCE
TB is the complete list of accounts with their respective Debit or Credit
balance at a given point in time. Total Debit = Total Credit.
4 | Page
264678721 Anne Aantjes
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller aaantjes. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.86. You're not tied to anything after your purchase.
