HFT 2401HFT 2401Financial AccountingFinancial Accounting

Exam 1 ReviewExam 1 Review

Chapter 1Chapter 1

Definitions of accounting principlesDefinitions of accounting principles– Cost PrincipleCost Principle– Business EntityBusiness Entity– Continuity of the Business Unit (Going Concern)Continuity of the Business Unit (Going Concern)– Unit of MeasurementUnit of Measurement– Objective EvidenceObjective Evidence– Full DisclosureFull Disclosure– ConsistencyConsistency– MatchingMatching– ConservatismConservatism– MaterialityMateriality

Chapter 1Chapter 1

Fundamental Accounting EquationFundamental Accounting Equation– Assets = Liabilities + EquityAssets = Liabilities + Equity– Assets – Liabilities = EquityAssets – Liabilities = Equity– Assets – Equity = LiabilitiesAssets – Equity = Liabilities– Equity = Permanent + Temporary Owners Equity = Permanent + Temporary Owners

EquityEquity– Temporary Owners Equity = Revenue - Temporary Owners Equity = Revenue -

ExpensesExpenses

Chapter 1Chapter 1

Advantages & Disadvantages of:Advantages & Disadvantages of:– Sole ProprietorshipSole Proprietorship– PartnershipPartnership– CorporationCorporation– S CorporationS Corporation

Chapter 2Chapter 2

Debit vs. Credit (Left vs. Right)Debit vs. Credit (Left vs. Right) Types of accounts and their definitions – Asset, Types of accounts and their definitions – Asset,

Liability, Equity, Revenue, Expense (See pp 42 -Liability, Equity, Revenue, Expense (See pp 42 -44)44)

Normal BalancesNormal Balances Assets – Increase by debit, decrease by creditAssets – Increase by debit, decrease by credit Liability & Equity - Increase by credit, decrease by Liability & Equity - Increase by credit, decrease by

debitdebit Trial BalanceTrial Balance

Chapter 3Chapter 3

What is an adjusting entry?What is an adjusting entry? Definition of depreciationDefinition of depreciation Accrual vs. cash basis accountingAccrual vs. cash basis accounting Definition of an accrual entry vs. a deferral Definition of an accrual entry vs. a deferral

entryentry Effects on financial statements for failing to Effects on financial statements for failing to

prepare entries (see chart on p 89)prepare entries (see chart on p 89)

Chapter 3Chapter 3

Accrual Entries – RelationshipsAccrual Entries – Relationships– Asset & RevenueAsset & Revenue– Liability & ExpenseLiability & Expense– AddAdd

Deferral Entries – RelationshipsDeferral Entries – Relationships– Asset & ExpenseAsset & Expense– Liability & RevenueLiability & Revenue– DelayDelay

Chapter 4Chapter 4

Complete a trial balance worksheet with Complete a trial balance worksheet with adjustmentsadjustments

Closing Account Balances to Income Closing Account Balances to Income SummarySummary

Posting Adjusting Entries and Completing a Posting Adjusting Entries and Completing a Worksheet with Post Closing Trial Balance Worksheet with Post Closing Trial Balance (See handout problem) (See handout problem)

Final NoteFinal Note

Bring a calculator!!! No cell phones.Bring a calculator!!! No cell phones.

Scantrons requiredScantrons required

Brown form #2052Brown form #2052

Bring pencilsBring pencils

Questions?Questions?