Accounting 1: QuickStudy Laminated Reference Guide

Table of Contents

Accounting Basics

Financial Statements: Formal Reports of an Entity

Transactions

The Accounting Cycle

Recording Transactions

Operating Cycle of a Merchandise Business

Types of Business Organizations

Accounting in Business

Inventory Systems

Corporate Characteristics

Assets

Obligations

Owners’ Equity

Accounting Basics

Accounting Standards

Accounting principles have been in existence since the late 1400s when devised by Luca Pacioli, an Italian mathematician, and have evolved over time

Modern-day accounting principles in the United States are called generally accepted accounting principles (GAAP); these principles guide the work of accountants and auditors

The U.S. Securities and Exchange Commission (SEC) has regulatory authority over accounting principles used by public corporations

The SEC is a federal agency responsible for enforcing the federal securities laws and regulating the securities industry

It delegates the responsibility for the development of GAAP to the accounting profession via the Financial Accounting Standards Board (FASB)

The FASB develops new standards via due process activities that allow input from accountants and executives in business and industry

The International Accounting Standards Board (IASB) develops global ac­counting standards

Multinational companies follow IASB standards

The IASB works with other key global accounting standards bodies to create a single source of accounting standards

The Government Accounting Standards Board (GASB) sets state and local government standards for accounting

The GASB is a private, nongovernmental organization subject to oversight and funding by the Financial Accounting Foundation (FAF)

The federal government follows standards set by the FASB when performing accounting for its units

Concepts & Principles

Entity concept

An organization stands apart from other organizations as a separate economic unit

Assets and obligations must be accounted for separately from the personal re­sources and obligations of its owners

Going concern concept (a.k.a. continuity assumption): The entity will continue to operate long enough to meet its contractual obligations and carry out plans

Time period concept

Businesses should report information at regular intervals

Annual reports show income for the last 12 months and end on the last day of the fiscal year; therefore, annual reports show the financial position as of the