Financial accounting period 3 chapter 1
Accounting; information system that measures business activities, process the information
into reports, and communicates the results to the decision makers.
Creditor; any person or business to whom a business owes money.
CPA; licensed professional accountants who serve the general public.
CMA; certified professionals who specialize in accounting and financial management
knowledge. They typically work for a single company.
FASB (financial accounting standards board); the private organization that oversees the
creation and governance of accounting standards in the US.
SEC (securities and exchange commission);
Us governmental agency that oversees the US financial markets.
GAAP (General accepted accounting principles); accounting guidelines, currently formulated
by the financial accounting standards board (FASB).
Faithful representation; providing information that is complete, neutral and free from error.
Economic entity assumption; an organization that stands apart as a separate economic unit.
Sole proprietorship Eenmanszaak
Partnership VOF
Corporation NV
Limited liability company BV
The cost principal; a principle that states that acquired assets and services should be
recorded at their actual costs.
Going concern assumption; assumes that the entity will remain in operation for the
foreseeable future.
Monetary unit assumption; requires the items on the financial statement to be measured in
terms of a monetary unit.
International financial reporting standards (IFRS); a set of global accounting guidelines
formulated by the international accounting standards board (IASB)
IASB (international accounting standards board; the private organization that oversees the
creation and governance of international financial reporting standards.
Audit; An examination of a company’s financial statements and records. So independent
accountants will look at the financial statements provided by the company to see if it’s done
correctly.
Sarbanes-oxley act; requires management to review internal control and take responsibility
for the accuracy and completeness of their financial reports.
Accounting equation; it measures the resources of a business (what the business owns or
has control of) and the claims to those resources (what the business owes to creditors and
owners). Assets = Liabilities + equity. Assets are on the left-side of the equation and liabilities
and equity are on the right-side.
Assets; something the business owns or has control of with an economic value.
Liabilities; debts that are owed to creditors.
Equity; the owners’ claims to the assets of the business. It is the company’s net worth.
Contributed capital; owner contributions to a corporation.
Revenues; amounts earned from delivering goods or services to customers.
Common stock; represents the basic ownership of a corporation.
, Retained earnings; equity earned by profitable operations of a corporation that is not
distributed to stockholders.
Examples;
When Jurriën invests 50.000 in the corporation Dildo, the following accounts will be
affected; Cash +50.000 (left-side)
Common stock +50.000 (right-side)
And as you can see, they are in balance.
When the company decides to invest money in a location of 20.000 for a new building, the
transaction will be the following;
Cash (begin) 50.000
Cash -20.000 Common stock + 50.000
Location +20.000
Dildo bv buys office supplies on account (credit) agreeing to pay 1000 within 30 days.
Cash 30.000 Common stock 50.000
Location 20.000 Accounts payable 1000
Office supplies 1000
Dildo BV earned some money by providing some training by people, the earnings are 10.000.
Cash 40.000 common stock 50.000
Location 20.000 accounts payable 1.000
Office supplies 1.000 Retained earnings 10.000
Dildo BV performs a service for a client and agreed to receive 5.000 within one month.
Cash 40.000 common stock 50.000
Accounts receivable 5.000 accounts payable 1.000
Location 20.000 retained earnings 15.000
Office supplies 1.000
Dildo BV pays in cash 3.000 for office rent and 2.000 for salary.
Cash 35.000 common stock 50.000
Accounts receivable 5.000 Accounts payable 1.000
Location 20.000 Retained earnings 15.000
Office supplies 1.000 Rent expense 3.000
Salaries 2.000
Dildo BV pays 500 to the store they bought their office supplies from.
Cash 34.500 Common stock 50.000
Accounts receivable 5.000 accounts payable 500
Location 20.000 retained earnings 15.000
Office supplies 1.000 rent expense 3.000
Salaries 2.000
Accounting; information system that measures business activities, process the information
into reports, and communicates the results to the decision makers.
Creditor; any person or business to whom a business owes money.
CPA; licensed professional accountants who serve the general public.
CMA; certified professionals who specialize in accounting and financial management
knowledge. They typically work for a single company.
FASB (financial accounting standards board); the private organization that oversees the
creation and governance of accounting standards in the US.
SEC (securities and exchange commission);
Us governmental agency that oversees the US financial markets.
GAAP (General accepted accounting principles); accounting guidelines, currently formulated
by the financial accounting standards board (FASB).
Faithful representation; providing information that is complete, neutral and free from error.
Economic entity assumption; an organization that stands apart as a separate economic unit.
Sole proprietorship Eenmanszaak
Partnership VOF
Corporation NV
Limited liability company BV
The cost principal; a principle that states that acquired assets and services should be
recorded at their actual costs.
Going concern assumption; assumes that the entity will remain in operation for the
foreseeable future.
Monetary unit assumption; requires the items on the financial statement to be measured in
terms of a monetary unit.
International financial reporting standards (IFRS); a set of global accounting guidelines
formulated by the international accounting standards board (IASB)
IASB (international accounting standards board; the private organization that oversees the
creation and governance of international financial reporting standards.
Audit; An examination of a company’s financial statements and records. So independent
accountants will look at the financial statements provided by the company to see if it’s done
correctly.
Sarbanes-oxley act; requires management to review internal control and take responsibility
for the accuracy and completeness of their financial reports.
Accounting equation; it measures the resources of a business (what the business owns or
has control of) and the claims to those resources (what the business owes to creditors and
owners). Assets = Liabilities + equity. Assets are on the left-side of the equation and liabilities
and equity are on the right-side.
Assets; something the business owns or has control of with an economic value.
Liabilities; debts that are owed to creditors.
Equity; the owners’ claims to the assets of the business. It is the company’s net worth.
Contributed capital; owner contributions to a corporation.
Revenues; amounts earned from delivering goods or services to customers.
Common stock; represents the basic ownership of a corporation.
, Retained earnings; equity earned by profitable operations of a corporation that is not
distributed to stockholders.
Examples;
When Jurriën invests 50.000 in the corporation Dildo, the following accounts will be
affected; Cash +50.000 (left-side)
Common stock +50.000 (right-side)
And as you can see, they are in balance.
When the company decides to invest money in a location of 20.000 for a new building, the
transaction will be the following;
Cash (begin) 50.000
Cash -20.000 Common stock + 50.000
Location +20.000
Dildo bv buys office supplies on account (credit) agreeing to pay 1000 within 30 days.
Cash 30.000 Common stock 50.000
Location 20.000 Accounts payable 1000
Office supplies 1000
Dildo BV earned some money by providing some training by people, the earnings are 10.000.
Cash 40.000 common stock 50.000
Location 20.000 accounts payable 1.000
Office supplies 1.000 Retained earnings 10.000
Dildo BV performs a service for a client and agreed to receive 5.000 within one month.
Cash 40.000 common stock 50.000
Accounts receivable 5.000 accounts payable 1.000
Location 20.000 retained earnings 15.000
Office supplies 1.000
Dildo BV pays in cash 3.000 for office rent and 2.000 for salary.
Cash 35.000 common stock 50.000
Accounts receivable 5.000 Accounts payable 1.000
Location 20.000 Retained earnings 15.000
Office supplies 1.000 Rent expense 3.000
Salaries 2.000
Dildo BV pays 500 to the store they bought their office supplies from.
Cash 34.500 Common stock 50.000
Accounts receivable 5.000 accounts payable 500
Location 20.000 retained earnings 15.000
Office supplies 1.000 rent expense 3.000
Salaries 2.000
