Victoria’s Accounting I Study Guide [Overview//the test] There will be basic multiplechoice questions and basic math multiplechoice questions on the test. You’re allowed a calculator (provided), but expect to use it for only a few problems on the test. Accounting I is only a test on the basics of the topic but still study as much as you can since there are a wide variety of topics that will be covered. [Guidance Contact//contact me if you have any questions] Victoria Lin Secretary aim: thinkpoink email: firstname.lastname@example.org home phone: 9739456 cell phone: 3965833 Topics Covered//BASIC; what they are, how they function, and their relationships basic practices of accounting for the sole proprietorship the partnership the corporation terminology journalizing posting income statement balance sheet account classification worksheet bank reconciliation payroll etc. [basic accounting cycle] Websites//start by browsing or researching online terminology http://www.nysscpa.org/prof_library/guide.htm basic principles (with problems and solution downloads) http://www.simplestudies.com/ tutorial on basics http://www.access.wvu.edu/class/acctutor/tableofc.htm explanations for a few terms http://www.businesstown.com/accounting/basic.asp thorough pdf file http://www.accsoftch.com/accountingconcepts.pdf Textbooks//boring but still a mustdo! (better than websites) Financial Accounting Fourth Edition by Walter T. Harrison Jr. & Charles T. Horngren: Prentice Hall Foundations of Finance Third Edition by Arthur J. Keown, John D. Martin, J. William Petty, David F. Scott, Jr.: Prentice Hall Accounting Principles I CliffsQuickReview Accounting by Peter J. Eisen: Barron’s Educational Series
The Essential Dictionary of Accounting by Kate Mooney
Review Studies//general vocabulary 1. What is accounting? the information system that measures business activities, processes that information into reports, and communicates the results to decision makers 2. What are financial statements? the documents that report financial information about a business entity to decision makers 3. What is proprietorship? has a single owner called the proprietor (generally the manager) 4. What is a partnership? joins two or more persons together as coowners 5. What is a corporation? a business owned by stockholders/shareholders (people who own stock – shares of ownership – in the business) 6. What is GAAP? stands for generally accepted accounting principles; rules that govern how accountants operate 7. What is entity? most basic concept in accounting – an organization or section of an organization that stands apart as a separate economic unit 8. The transactions of different entities should not be accounted for together. Instead, each entity should be evaluated separately. 9. What is the reliability principle/objectivity principle? reliable data are verifiable and can be confirmed by an independent observer; ensures that accounting records and statements are as accurate and reliable as possible based on the most reliable data available 10. What is the cost principle? acquired assets and services should be recorded at their actual cost or historical cost 11. What are ASSETS? the economic resources of a business that are expected to be of benefit in the future (ex. cash, office supplies, merchandise, furniture, land, buildings) 12. What are LIABILITIES? “outsider claims” – economic obligations (debts) payable to outsiders/creditors 13. What is OWNER’S EQUITY/CAPITAL? “insider claims” – assets held by owners of a business 14. What is the ACCOUNTING EQUATION? Economic Resources = Claims to Economic Resources or Assets = Liabilities + Owner’s Equity 15. What is paidin/contributed capital? amount invested in the corporation by its owners 16. What is the basic component of paidin capital? common stock 17. What are retained earnings? amount earned by incomeproducing activities and kept for use in the business 18. What are REVENUES? increases [+] in retained earnings from delivering goods or services to customers or clients 19. What are EXPENSES? decreases  in retained earnings that result from operations 20. What is the result of operations called when total revenues exceed total expenses? net income/net earnings/net profit 21. What is the result of operations called when total expenses exceed total revenues? net loss 22. What are dividends? distributions to stockholders of assets (usually cash) generated by net income [DIVIDENDS ARE NOT EXPENSES!] 23. What does the income statement/statement of operations/statement of earnings report? the company’s revenues, expenses, and net income of net loss for the period 24. What is the relation between revenues, expenses, and net income? net income = total revenues and gains – total expenses and losses 25. What does the word “net” mean in accounting? the result after a subtraction has occurred 26. Describe a company’s balance sheet/statement of financial position. reports 3 main categories of items: assets, liabilities, and owner’s equity
27. What are CURRENT ASSETS? assets the company expects to convert to cash, sell, or consume during the next 12 months or within a business’s normal operating cycle if longer than a year 28. What is ACCOUNTS RECIEVABLE? amounts collectible from customers to whom the company has sold merchandise on credit with the understanding that customers will pay within a month or two 29. What is the statement of cash flows? 1. companies operate by buying goods and services, which they turn around and sell to customers 2. companies invest in longterm assets that they use to run the business 3. companies finance themselves to get the funds needed to operate 30. What is a transaction? any event that both affects the financial position of the business entity and can be reliably recorded 31. How does doubleentry accounting work? uses debits (simply the left side of an account) and credits (the right side of an account) to record the dual effects of each business transaction 32. assets and expenses, liabilities, stockholders’ equity, and revenues are INCREASED by debits; DECREASED by credits 33. What is a journal? where accountants first record business transactions, a chronological record of the entity’s transactions; each entry includes a date, the titles of the accounts debited and credited, the dollar amounts debited and credited, and a short explanation of the transaction 34. What is used AFTER a journal? the ledger – info from the journal is POSTED or COPIED to the ledger, a grouping of all the individual accounts and their balances 35. What is a trial balance? a list of all accounts with their balances – assets first, followed by liabilities, stockholders’ equity, revenues, and expenses 36. What are the 4 inventory costing methods? specific unit cost, weightedaverage cost, firstin firstout (FIFO – reports ending inventory) cost, lastin firstout (LIFO – reports cost of goods sold) cost 37. What is GROSS PROFIT? the excess of sales revenue over cost of goods sold 38. What are plant assets? longlived tangible assets (ex. land, buildings, equipment) 39. What is DEPRECIATION? the allocation of a plant asset’s cost to expense over its useful life 40. What is a stock dividend? a proportional distribution by a corporation of its own stock to its stockholders 41. What is benchmarking? the practice of comparing a company to a standard set by other companies, with a view toward improvement Methods for Studying//steps to get you there FIRST 1. Study the terminology/vocabulary. Why? Because the test is vocabularyheavy and the only way for you to understand what the question is asking for/the answer is if you know the accounting terms. Use the terminology website provided above or the glossary of a textbook! This is the most important step! SECOND 2. Apply the vocabulary learned to balance sheets and scenarios involving math (kind of like wordmath problems). You will see a couple mathword problems on the test involving the accounting equation as well as interpret a sample balance sheet. For these, the best way to study is from a textbook because most provide practice problems and answers. If you don’t have a textbook on hand, talk to me and I’ll give you a couple scans from my textbook. THIRD 3. Take practice tests provided from A+ Board! Circle the ones you get wrong and remember to specifically study those terms/concepts.
FOURTH 4. Contact me if you have any questions on Accounting I, need more guidance, or need more material to study from!
HAPPY STUDYING and good luck!