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STUDY GUIDE EXAM 1: (25 multiple choice questions worth 3 points each and 3 problems worth 45 points)
3 problems may cover following topics: journal entries, adjusting journal entries, closing entries, preparation of financial statements, multiple step income statement.
Chapter 1:
Purpose (objective) of financial accounting; cash vs accrual accounting (net operating cash flow vs. net income); history of standard setting – SEC, AICPA (formerly AIA), CAP, APB, FASB; process of standard setting (graphic 1-4); global accounting standards – IASC, IASB, IFRS, Covergence project; Sarbanes-Oxley Act 2002 – Key provisions; Conceptual framework – objective of financial reporting, qualitative characteristics (Graphic 1-7)- fundamental and enhancing qualitative characteristics, practical boundaries to achieving qualitative characteristics, elements of financial statements (Graphic 1-8 on page 27); Recognition and measurement concepts – assumptions, broad accounting principles.
Chapter 2:
Basic accounting equation, double entry system; Accounting Processing cycle – all steps 56; should know how to make journal entries, post journal entries to T-accounts, preparing unadjusted trial balance 64, adjusting journal entries 66 (all types), preparing adjusted trial balance, preparing financial statements, closing entries, post closing trial balance.
Chapter 3:
Balance Sheet – uses and limitations; Classification – Asset (current vs. non current), Liab. (current vs. noncurrent), Stockholders’ equity, should know how to prepare a classified balance sheet; Disclosure notes; managements’ responsibility – responsibility for fairness of financial statements and responsibility for reporting on internal controls; auditor’s report - report and opinion on fairness of financial statements (Graphic 3-14 on page 130), report on assessment of internal controls; risk analysis –

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