Principles Of Accounting Level 1 Chapter 1

Temporary vs. Permanent Accounts – Temp: Expenses, Revenues, Dividends
Permanent: Assets, Liabilities, S.E.
Consistency – closely related to comparability-applying the same policies and procedures year after year
Sales Returns and allowances 300
Accounts recievable 300
Inventory 140
COGS 140 – Sauk returns $300 in goods to PW Audio. The cost of the goods is $140 how does the seller account for this?
Cash Flow from Operating Activities, and examples – CFO- Are cash flow that are directly related to earning income. Example, collecting cash from costumers, pay salaries, pay bills, pay to suppliers.
bookkeeper/information processor – one who is involved in the process of recording financial information in a prescribed manner
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)
Federal Unemployment Tax Act/F.U.T.A. – a federal act imposed upon each employer for financing the administration costs of the federal and state unemployment compensation programs.
discount period – a specific number of days during which a discount is available if the account is paid
bond – a certificate that represents a corporation's promise to repay a certain amount of money and interest in the future
Which abbreviation stands for a diagnostic laboratory test?
Administration Expenses – those relating to the daily running of the business.Eg Rent, telephone
Cost of Goods Sold (CGS) – …Is a Debit balance account.
Which аbbreviаtiоn stаnds fоr a diagnоstic laboratory test?
accountant – is expected to make choices and decisions about the designof accounting systemsand prepareand explain financial reports.
Liabilities – Money you owe someone and claims over assets
When standards are used to develop a budget:
a. past inefficiencies are excluded
b. benchmarking must also be used
c. information is available at a low cost
d. flexible-budget amounts are difficult to determine – a. past inefficiencies are excluded
A discount offered by a business is a/an: – Cash Discounts
A major purpose of preparing closing entries is to:
A) adjust the asset accounts to their correct current balances
B) update the retained earnings account
C) zero out the liability account
D) close out the supplies account – B) update the Retained Earnings account

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