ACCOUNTING PRINCIPLES VOLUME 1 FULL
REVISION NOTES WITH DOUBLE ENTRY
BOOKKEEPING AND LEDGER CONCEPTS
◉ Liabilities.
Answer: Amount that company owes
◉ Equity.
Answer: Amount invested in company by owners; owners claim no
assets
◉ Accounting equation.
Answer: Assets = liabilities + equity
◉ Truism in business.
Answer: Company never receives greater than it gives & never gives
greater than it receives
◉ 4 Rules of debits & credits.
Answer: 1. Debit amount received; credit amount given up
2. Debuts on left; credits on the right
3. In each transactions; list debits first (good) & credits last (bad)
,4. Total debits = total credits
◉ Making an ethical decision.
Answer: 1. Identify ethical concerns- use personal ethics to
recognize concern
2. Analyze options- consider all good & bad consequences
3. Make ethical decision- choose best option given circumstances
◉ Fraud.
Answer: Intentional manipulation- focus on prevention. Once fraud
is committed, loses are rarely retrieved.
◉ Fraud Triangle.
Answer: Opportunity (low risk of being caught), Financial Pressure
(incentive), Rationalization (making situation justifiable)
◉ GAAP (generally accepted accounting principles).
Answer: Financial accounting is governed by concepts & rules.
1. Relevant info affects decision of user
2. Reliable info trusted by users
3. Comparable info aids in contrasting organizations
, ◉ SEC- Securities and Exchange Commission.
Answer: Federal agency congress has charged to set reporting rules
for org that sell ownership shares to public
◉ FASB (Financial Accounting Standards Board).
Answer: Independent group of full-time members responsible for
setting accounting rules
◉ IASB (international accounting standards board).
Answer: Group that identifies preferred accounting practices &
encourages global acceptance; issues IFRS
◉ Measurement/cost principle.
Answer: Accounting info based on actual cost.
-if cash is given for a service, cost is measured by cash paid
-if other is exchanged (car traded for truck), cost is measured as cash
value of what is given up or received
This ensure reliability, verifiability
◉ Revenue Recognition Principle.
Answer: Recognition = recording
-happens when goods or services are provided to customers
REVISION NOTES WITH DOUBLE ENTRY
BOOKKEEPING AND LEDGER CONCEPTS
◉ Liabilities.
Answer: Amount that company owes
◉ Equity.
Answer: Amount invested in company by owners; owners claim no
assets
◉ Accounting equation.
Answer: Assets = liabilities + equity
◉ Truism in business.
Answer: Company never receives greater than it gives & never gives
greater than it receives
◉ 4 Rules of debits & credits.
Answer: 1. Debit amount received; credit amount given up
2. Debuts on left; credits on the right
3. In each transactions; list debits first (good) & credits last (bad)
,4. Total debits = total credits
◉ Making an ethical decision.
Answer: 1. Identify ethical concerns- use personal ethics to
recognize concern
2. Analyze options- consider all good & bad consequences
3. Make ethical decision- choose best option given circumstances
◉ Fraud.
Answer: Intentional manipulation- focus on prevention. Once fraud
is committed, loses are rarely retrieved.
◉ Fraud Triangle.
Answer: Opportunity (low risk of being caught), Financial Pressure
(incentive), Rationalization (making situation justifiable)
◉ GAAP (generally accepted accounting principles).
Answer: Financial accounting is governed by concepts & rules.
1. Relevant info affects decision of user
2. Reliable info trusted by users
3. Comparable info aids in contrasting organizations
, ◉ SEC- Securities and Exchange Commission.
Answer: Federal agency congress has charged to set reporting rules
for org that sell ownership shares to public
◉ FASB (Financial Accounting Standards Board).
Answer: Independent group of full-time members responsible for
setting accounting rules
◉ IASB (international accounting standards board).
Answer: Group that identifies preferred accounting practices &
encourages global acceptance; issues IFRS
◉ Measurement/cost principle.
Answer: Accounting info based on actual cost.
-if cash is given for a service, cost is measured by cash paid
-if other is exchanged (car traded for truck), cost is measured as cash
value of what is given up or received
This ensure reliability, verifiability
◉ Revenue Recognition Principle.
Answer: Recognition = recording
-happens when goods or services are provided to customers
