Accounting 1 (quickstudy Reference Guides - Academic)

BarCharts, Inc.® WORLD’S #1 QUICK REFERENCE GUIDE ACCOUNTING BASICS CONCEPTS, PRINCIPLES & BASIS A. Entity Concept • An organization stands apart from other organizations as a separate economic unit B. Going Concern Concept • Entity will continue to operate long enough to recover cost of its assets C. Time Period Concept • Report information at regular intervals D. Reliability Principle • Accounting records must be based on the most reliable (verifiable by an independent observer) data available E. Cost Principle • Assets/services acquired are recorded at actual, historical cost F. Revenue Principle 1. Establishes when to record revenue, usually when earned 2. Revenue is earned when the business has completed rendering services to the customer 3. Amount to record is equal to cash value of services or goods G. Matching Principle • Expenses matched against revenues in same accounting period H. The Accounting Period 1. Usually one year ending December 31 2. Fiscal year ends on any other date of the year I. Cash Basis Accounting • Impact of events not recognized until cash is paid or received J. Accrual Basis Accounting 1. Impact of events recognized as they occur 2. Transactions are recorded even when cash not received or paid 3. Required by GAAP K. Stable Monetary Unit • Basis for ignoring inflation THE ACCOUNTING EQUATION ASSETS=LIABILITIES+OWNERS’ EQUITY A. Assets 1. Economic resources expected to benefit company in future a. Cash: Money, certificates of deposit, and checks b. Accounts Receivable: Oral or implied promise, usually arise from sales made to customers, no promissory note exists c. Notes Receivable: Promissory notes d.