Essay on Generally Accepted Accounting Principles and Accounting Standards Board

Submitted By loumand1
Words: 956
Pages: 4

Accounting is an information and measurement system that identifies, records, and communicates information that is relevant, reliable, and comparable
GAAP- Financial accounting practice is governed by concepts and rules by:Luca Pacioli (Italian monk double entry bookeeping)
Securities and Exchange Commission- government agency establish reporting requirements and set GAAP for companies that issue stock to the public.
The Financial Accounting Standards Board- the private group that sets both broad and specific principles.
The International Accounting Standards Board (IASB) issues inter- national standards that identify preferred accounting practices in other countries
Sarbanes-Oxley Act- In response to a number of publicized accounting scandals help curb financial abuses at companies that issue their stock to the public.

*Assets- (Cash, Accounts Receivable, Notes Receivable, Land, Buildings, Equipment, Store Supplies,Prepaid Expense, Investment,Inventory)
*Liabilities- (Accounts, Notes, Wages, Taxes Payable)
*Equity- (Contributed Capital, Retained Earnings, Common Stock, Dividends/Revenue(contra-equity accounts) Formula: Capital – Dividends(Drawings) + Revenue – Expenses OR Assets + Owner’s Drawings + Expenses = Liabilities + Owner’s Capital + Revenue.

-Financial Statements: Income, Retained Earnings, Balance Sheet, Cash Flow

^BALANCE SHEET- Current assets are those to be used or turned into cash within the upcoming year, NonCurrent assets are those that will last longer than one year.
-Which of the following is not an advantage of the corporate form of business organization? c.) Unlimited personal liability for stockholders
-A CPA’s reputation for honesty and competence is his/her most important asset .

-1st Record in Journal, 2nd Post to ledger Accounts(*T-Tables*), 3rd Trial Balance
-Account a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.
-Ledger is a collection of all accounts for an information system.
-General Ledger is a record containing all accounts used by the company.
-Debits and Credits- abbrev. Cr and Dr, left and right, used to describe the balance of an account Assets- INCREASED by DEBITS Liabilities&Equities- INCREASED by CREDITS
-Journalyzing- Entering transaction data in the journal separate entries made for EACH transaction
- Journal-: 1 discloses in one place the complete effect of a transaction 2 provides a chronological record of transactions 3 helps to prevent or locate errors as debit and credit amounts for each entry can be compared
-Transactions- initially recorded in chronological order before they are transferred to the ledger accounts.
- Objective of Financial Reporting- to provide useful economic information to external users for decision making and for assessing future cash flows . -Fiscal Year- 1 full accounting time period
- Adjusting entries are made in order for: revenues to be recorded in the period in which they are earned expenses to be recognized in the period in which they are incurred
- Accrual Basis- Revenues are recognized when earned and expenses are recognized when incurred.
- Prepaid Expense- Resources paid for prior to receiving the actual benefits. Expire with time ex) asset-expense account relationship Company Pays>>>Debit:Prepaid Expense/ Credit: Cash Debit: Expense/ Credit: Asset
- Depreciation- process of allocating the asset costs minus present costs over the expected useful life. Debit: Dep. Expense/ Credit Accumulated Depreciation