ACCTG 231 Study Guide - Final Guide: Financial Accounting Standards Board, Uniform Partnership Act, Legal Personality
14 Dec 2016
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Module 1:
• Business Forms:
o Sole Proprietorship – 1 owner
▪ Most common
▪ Taxes paid on the individual’s pesoal ta etu
▪ Unlimited liability, limited life
o Partnership – 2+ owners
▪ Requires a partnership agreement – without one, the court can
dictate outcome disputes under the Uniform Partnership Act
▪ Unlimited liability – creditors can seize personal assets to satisfy
debt
▪ Mutual agency – each partner is responsible for actions of the other
partner
▪ Limited life
o Corporation – separate legal entity apart from the owners
▪ requires permission of the state to be formed
▪ unlimited life – meaning the death of a stockholder will not end the
business
▪ limited liability – creditors cannot seize the personal property of the
stockholders to satisfy company debts
▪ Double taxation – the corporation is taxed as an entity unto itself.
Dividends to stockholders are then taxed at the individual level.
• Risk Averse – avoid risk, prefer the known
• General Accounting Concepts:
o Business Entity – keeping the business separate from the owners and
creditors
o Historical Costs – the cost of an item at the time of the accounting event
o Monetary Unit – whatever is being used in the form of money
o Materiality – the point at which the size of the accounting event begins to
ifluee a use’s deisio
o Going Concern – assumes that the entity will continue to the future
• GAAP:
o Financial Accounting Standards Board (FASB) – determines GAPP principles
▪ 7 full time paid professionals, 2 terms for 5 years each, max
o FASB Concept #8:
▪ Qualitative Characteristics in Concepts
▪ Makes sure that the goal is to have information for users to make
informed decision but is also factual and reliable
find more resources at oneclass.com
find more resources at oneclass.com
Module 2:
• 4 Internal Control Objectives –
o Safeguard Assets – keeping data, assets, and people safe.
o Provide Accurate and Reliable Information
o Promote Operational Efficiency – keeping things running smoothly.
Dividing jobs to find errors, protect from theft, etc
o Encourage Adherence to Prescribed Managerial Policies
• The 5 Control Procedures:
o Requiring Proper Authorization – giving someone authority to approve
transactions
o Separating Incompatible Duties – no one person is assigned duties that
include a combination of:
▪ Custody – who handles cash, writes checks, etc
▪ Recording Function – preparing invoices, maintaining journals,
ledgers or other files, preparing reconciliations.
▪ Authorization Functions – authorizing transactions, reviewing
requests, determining the need for purchases, signing checks.
o Maintaining Adequate Documents and Records
o Physically Controlling Assets and Documents – limiting access to assets to
prevent unauthorized use, theft, or damage.
o Providing Independent Checks on Performance – having someone else
review your performance
▪ Compensating Controls – sometimes an alternative control is used
to make up for the fact that another control is not in place.
find more resources at oneclass.com
find more resources at oneclass.com
Module 3:
• The 3 Goals of the Revenue Cycle:
o Meet customer needs for quality/quantity, price, and type of good
o Collect payment in a timely fashion from customers
o Provide support to assure future sales
• The 5 Major Activities of the Revenue Cycle:
o Determine marketing and distribution channels
o Receive and Accept Orders
o Deliver Goods or Services to Customers
▪ Bill of Lading – document indicating the terms between the seller and buyer
▪ FOB Shipping Point (FOB Origin) – sale occurs at the shipping point
• Buyer owns goods during transit
▪ FOB Destination – sale occurs at the destination
• Seller owns goods during transit
o Billing Credit Customers and Collecting Payments
o Collecting from Customers –
▪ Remittance Advice – a note sent to the supplier saying the buyer has paid
the bill
• $1,000 borrowed for 90 days at 10% APR. Interest = 1,000 x .1 x 90/365
• Borrow money when bank interest is less than the purchase discount offered
• The Expenditure Cycle:
o The 3 goals:
▪ Get the quantity, quality, and price and type of goods when needed
▪ Ensure timely payment to the vendor for our goods
▪ Develop good relationships with suppliers
o The 4 Major Activities:
▪ Deteie the usiess’s eed fo goods/sevies
▪ Select Vendors and Order goods/services
▪ Receiving, Securing, and Storing Goods
▪ Paying for Goods/Services
• The Conversion Cycle - to manufacture the desired quality of products using resources
efficiently and effectively
o Scheduling Production:
▪ Operations list – shows what machines are needed
▪ Bill of Materials – list of what materials are needed
o Obtain Raw Materials:
▪ Materials Requisition – used to track materials removed from storage to use
in production
o Making Products:
▪ Production Order – used to alert workers to initiate production and required
to fulfill the productions schedule
▪ Manufacturer Overhead – additional resources used to produce the goods
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Module 2: 4 internal control objectives , safeguard assets keeping data, assets, and people safe, provide accurate and reliable information, promote operational efficiency keeping things running smoothly. Expenses are recorded when resources are utilized to earn revenue: cash revenues are recorded when cash is received. This basis of accounting ignores performance and utilization: general ledger book of individual accounts. Home of the t accounts: general journal book of original entry. Post aje"s to the ge(cid:374)e(cid:396)al ledge(cid:396: summarization process prepare an adjusted trial balance from the general ledger, prepare the financial statements from the adjusted trial balance, closing process prepare closing entries using the adjusted trial balance. Close all temporary accounts by transferring their balances into oe: summarization process prepare a post-closing trial balance from the general ledger, balance sheet accounts, a/r, a/p, a/d, cash, capital stock, equipment, interest. Income statement: cogs, advertising expense, bad debt expense, depreciation expense,
