E) Sometimes firms use bureaucratic rules that purposely limit active decision making. Q2 According to the rules of debit and credit, A) increases in asset, liability and owner’s equity accounts are recorded by credits. B) decreases in asset and liability accounts are recorded by debits. C) increases in revenue and dividend accounts are recorded by credits. D) decreases in liability and expense accounts are recorded by debits.
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reports balances of certain elements at a specific time. the income statement should be prepared first, it lists revenues and expenses and calculates the company's net income or net losss for a period of time. it lists all the expenses and losses on the debit side and all the income and gains on the creidt side. 2. a financial report indicates sources and amounts of revenues, amount of expenses accounts and profit or loss. generally prepared on either an accrual or cash basis | | Instructor Explanation:
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• GAAP meaning generally accepted accounting principles (GAAP) are basic sets of rules governing how the financial books and records of an organization are to be maintained; how revenues, expenditures, and expenses are to be accounted for; and how financial statements are to be prepared. (Ch. 3, pg. 20) • Basic accounting formula is used to determine what might be called the net worth of a private nonprofit human service agency. )Ch. 3, pg. 28) • Transaction/T-account is a transaction of any financial
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ACCOUNTING CYCLE The Series of business transactions which occur from the beginning of an accounting period to the end of an accounting period is referred any specific period of time for which a summary of business’s transaction is prepared. Steps in Accounting Cycle:1. 2. 3. Journalizing (Recording) Posting to Ledger (Classifying) Final Account (Summarizing) Now Explain Steps:1 Recording:- This is the basic function of accounting. All business transaction, as evidenced by some documents such
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double posting passed the test of mechanical accuracy. It is a fact that every transaction has dual aspect * System of debits and credits was used in ancient times – rise of proprietor and proprietorship allowed use of all financial elements of trade rather than just a system of record keeping * Paciolo showed no theory behind the ‘canceling out’ of debits and credits and the journal entry that followed, however he shows strong consciousness by closing accounts to profit and loss, and then
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decreases in specific asset, liability, and stockholders’ equity items. 3. Define debits and credits and explain how they are used to record business transactions. The terms debit and credit are synonymous with left and right. Assets, dividends, and expenses are increased by debits and decreased by credits. Liabilities, common stock, retained earnings, and revenues are increased by credits and decreased by debits. 4. Identify the basic steps in the recording process. The basic steps in the recording
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Chapter 3 (REVIEW-Self study chapter) After studying this chapter, you should be able to: Understand basic accounting terminology. Explain double-entry rules. Explain how transactions affect the accounting equation. Identify the steps in the accounting cycle and the steps in the recording process. Explain the reasons for and prepare adjusting entries. Explain how the type of ownership structure affects the financial statements. Prepare closing entries and consider other matters relating
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many transactions and they all have their own purposes and uses. It is also important to understand the difference between a Credit and a Debit entry to fully interpret the source documents. The basic rule of double entry bookkeeping is that for every debit there must always be an equal and corresponding credit. A Credit entry is any money that is entering the account. A Debit entry is any money that is leaving the account. Invoices: The seller of goods or services provides and invoice for the buyer
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accounting principles (GAAP) are the procedures and guidelines to be followed in the process of preparing financial statements. • Question 2 The Financial Accounting Standards Board (FASB) is a non-governmental agency that creates the GAAP rules for accounting. • Question 3 Stockholders own which type of business? • Question 4 If owner's equity and liabilities increased during the period, then assets must also have increased. • Question 5 When the owner withdraws cash
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KEY CONCEPTS OF FINANCE A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM ©Finitiatives Learning India Pvt. Ltd. (FLIP), 2010. Proprietary content. Please do not misuse! Accounting All businesses have financial transactions all the time. These are recorded in a particular way. Businesses can be structured in 3 ways: 1. Proprietorship: business with a single owner. Owner has complete liability for all debts of the company. 2. Partnership: business with 2 to 10 equal owners. All partners
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