Accounting: Debits & Credits

interest – fixed amount of money
accounting – the information system that measures business activities, processes that information into reports and financial statements, and communicates the results to decision makers.
internal users – directly involved and manages the organization
Financial reports – summarise the activities of a business over a period of time.
Invoice – a bill (example of a source document)
Key Trends (FIFO vs. LIFO) – During periods of increasing prices (inflation), using FIFO results in (1) lower COGS and therefore higher Gross Profit & Net Income on the Income Statement; and (2) higher Ending Inventory on the Balance Sheet. Note: the opposite effect would occur during periods of decreasing prices (deflation)
Total Asset Turnover – Measure of a company's ability to use its assets to generate sales. Computed by dividing net sales by average total assets
Capital – What the owner brings into the bussiness
accounting records – organized summary of business finical acti.
IFRS – International Financial Reporting Standards
Haydn __________.
Managerial – Reports for internal users
Gross profit – the profit that a company generates when considering only the sales price and the cost of the product sold
Statement of Cash Flows – Reports inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing.
FOB destination – that means that ownership transfers from the seller to the buyer when the buyer receives the goods. It also means that seller will pay the transportation cost.
False – T or F: When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage.
Hаydn __________.
what is the GAAP? – -accounting principles with authoritative support
-set of rules that is understood by financial reports
-guide to action that can and does change over time
-differs among countries
prepaid expenses – items such as supplies that will be used in the business the future
Expenses – payment made for ongoing costs in the operation of the business.
Example of good cash internal controls: – the accounting manager signs all check after agreeing the check to supporting documentation approved by anothermessage

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