Financial Accounting

ECON 1900 EXAM 1 REVIEW

The following may be used as an outline to assist your review for Exam 1.  This review is neither exhaustive nor inclusive of everything you should learn from the first half of the course.

CHAPTER 1

• Generally Accepted Accounting Principles (GAAP)

• Setting Account Principles
• Principles of Accounting
• Foundation Concepts

• Types of Business Entities
• The Accounting Equation
• Financial Statements

• Income Statement
• Statement of Owner’s Equity
• Balance Sheet
• Statement of Cash Flows

• Return on Assets

CHAPTER 2

• Account Types (Asset, Liability, Equity)
• Account Analysis

• Asset Accounts (Cash, A/R, Prepaid, etc)
• Liability Accounts (Accounts Payable, Notes Payable, etc)
• Equity Account (Owner’s Equity, Revenue, Expense, etc)

• Fundamentals of double-entry accounting

• Debits and Credits
• Journal Entries
• Posting to ledger

• Trial Balance (Preparing, Using, Presenting)
• Debt Ratio

CHAPTER 3

• The Accounting Period
• Accrual vs. Cash Basis Accounting
• Revenue/ Expense Recognition
• Adjusting Accounts/ Purpose of Adjusting Entries

• Prepaid/Deferred Expenses
• Unearned/Deferred Revenue
• Accrued Expenses
• Accrued Revenue

• Adjusted Trial Balance
• Profit Margin

CHAPTER 4

• Temporary vs. Permanent Accounts
• Closing Entries (Recording, Posting)
• Post-closing trial balance
• Balance Sheet

• Structure
• Categories

• Current Ratio

CHAPTER 5

• Merchandise

• Reporting Merchandiser Income
• Inventory Systems (Perpetual, Periodic)

• Purchases/ Sales

• Discounts
• Returns and Allowances
• Transportation Costs
• Ownership transfer

• ‘Completing the Accounting Cycle’ for Merchandisers
• Financial Statement Formats

• Multi- vs. Single-Step Income Statement
• Balance Sheet

• Acid Test and Gross Margin Ratios

CHAPTER 6

• ‘Inventory Basics’ & ‘Ownership’
• The Perpetual System

• Specific Identification, LIFO, FIFO, Weighted Average

• Financial Statement Effects

• Inventory Valuation (Lower of Cost or Market)
• Inventory Estimation (Retail Method, Gross Profit Percentage Method)
• Inventory Ratios

CHAPTER 7

• System Principles

• Control, Relevance, Compatibility, Flexibility, Cost- Benefit

• Special Journals in Accounting
• Subsidiary Ledgers
• Segment Return on Assets

CHAPTER 8

• Purposes and Principles of Internal Controls
• Cash Controls
• Banking Activities as Controls
• Bank Reconciliation
• Petty Cash Accounts
• Days’ Sales Uncollected

CHAPTER 9

• Accounts Receivable

• Recognition

• Valuing A/R

• Bad Debts- Write off vs. Allowance Method

• Estimating Bad Debts

• Percent of Sales Method
• A/R Methods

• Notes Receivable
• Disposing of Receivables

• Selling to a factor
• Collateral for loan
• Discount to bank

• Accounts Receivable Turnover