Besides the general journal, there are four different special journals; the Sales Journal, the Cash Receipts Journal, the Purchases Journal, and the Cash Journal.…
How is an account’s balance determined? What is meant by the term normal balance? Be able to calculate an account balance.…
Account: A record of increases and decreases in a specific asset, liability, or owner's equity item.…
An account will have a credit balance if the total debit amounts exceed the total credit…
The accounting equation is a formula that represents the relationship between the assets, liabilities, and owner 's equity of a small business. Businesses use this to basically show what it owns what it owes and what its investors are investing. In order to understand these concepts it is important to have some knowledge of what is meant by each of the three basic components mentioned. “Assets refer to the worth of goods or products in the possession of the owner. Liabilities represent the amount of cash or resources that were borrowed in order to acquire the assets. Net worth is the financial worth of the individual, less any outstanding debts to outside entities.”(M.Tatum 2013). These things are important because this is what makes a business of any size thrive. Business need to know these things so that it may make decisions about its future to determine whether or not it has the potential to be successful and prosper in the future or if they should take an alternate route to better their business practice.…
B. An examination of financial statements and underlying records for conformance with generally accepted accounting principles (GAAP).…
Historical costs – all things on financial statements are historical cost (i.e. how much money a company paid for something when the transaction happened, how much $ a company was paid for deals at the time they occurred…)…
Due to practical constraints and industry practice, GAAP principles are not always applied strictly but are modified as necessary. The following are some commonly observed modifying conventions:…
GAAP (Generally Accepted Accounting Principles) were established by the FASB, which has been given the authority to monitor and enforce these regulations. These regulations include consistency, relevance, reliability and comparability. To be consistent, all information gathered must be the same throughout all periods and have relevant meaning so those using the information can make educated guesses regarding the stability of the company. In addition, the information must be verifiable and comparable to other companies in the industry. (Bradford, 2007).…
A subsidiary ledger contains the details to support a specific general ledger account. The purpose is to provide quick access to a customer’s account activities and balance.…
Basic accounting concepts and business structures are important to a business’s success. Using generally accepted accounting principles (GAAP) brings a standard to financial statements. There must also be effective accounting information. A company can choose to use cash basis accounting or accrual basis accounting. Generally, GAAP does not accept cash basis accounting. A company can decide what type of business they want to operate. Sometimes making the best decisions for the business can mean the difference between success and failure.…
Generally Accepted Accounting Principles or U.S. GAAP refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally know as Accounting Standards. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing, and in the preparation of financial statements (Wikipedia, n.d.). Although quite flexible in guidelines, this framework is based upon certain constraints, principles to address specific necessities. U.S. GAAP is not the written law, they are flexible guidelines. However they are the standards used in the United States.…
Journal and ledgers are accounting records. Bookkeepers enter financial data into journals by making journal entries. Such information is then summarized in sub- and general ledgers. A sub-ledger is a section of a general ledger. For example, Client XYZ's sub-ledger is part of a business customers' general ledger. Accounting staff verify that balances are accurate by checking journal entries, vendor bills and customer invoices.…
* GAAP: Revenue recognition when realized or realizable and earned (Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises.)…
GAAP numbers prevents an entity from simply choosing a measurement method that puts its finances in the best possible light. The purpose of GAAP's influence on financial statements is to ensure that companies use a uniform set of standards to compile the statements. The impact on financial statements is strictly dictated by GAAP requirements. For example, GAAP requires that costs be reported during the same time period as any related assets that were created through those costs. GAAP places a stronger weight on reliability of…