HFT 2403HFT 2403Financial 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 4Chapter 4

Nominal vs Permanent AccountsNominal vs Permanent Accounts Closing Account Balances to Income Closing Account Balances to Income

SummarySummary Preparing a trial balancePreparing a trial balance 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)

Given the following information:Given the following information:Prepare a Trial Balance WorksheetPrepare a Trial Balance Worksheet

Cash 10,000Cash 10,000 Accts Recv 25,000Accts Recv 25,000 Inventory 35,000Inventory 35,000 Accts Payb 27,000Accts Payb 27,000 Wages Payb 6,000Wages Payb 6,000 EquityEquity 35,000 35,000 Room Rev 210,000Room Rev 210,000 Room Wage 65,000Room Wage 65,000 Room Exp 15,000Room Exp 15,000

Admin Exp 10,000Admin Exp 10,000 Sales Exp 27,000Sales Exp 27,000 Utilities 66,000Utilities 66,000 Interest 25,000 Interest 25,000

Final NoteFinal Note

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

Scantrons not requiredScantrons not required

You may want to use pencil rather than penYou may want to use pencil rather than pen

Questions?Questions?