Accounting Concepts - Thomas Sanders. Accounting Period Cycle - Chapter 6. Changes in financial info are reported for a specific period of time in the form of financial statements. Used for information in work sheets.
- Thomas Sanders
Changes in financial info are reported for a specific period of time in the form of financial statements.
Used for information in work sheets.
Goes on during accounting period, it is the time period financial statements are prepared.
One part of the cycle is when businesses prepare taxes at the end of the year.
Financial statements contain all info necessary to understand a business' financial condition.
Used to make informed decisions on financial statements.
When the balance sheet does not adequately disclose the liabilities, information still needs to be disclosed.
Financial info is recorded and reported separately from the owner's personal financial information.
Business info is separate from owner's info.
Insurance purchased for the owner's personal home is not recorded in the business' financial records.
The same accounting procedures must be followed in the same way in each accounting period.
Record info from one financial statement to another the same way so it can be compared.
If one account is used to keep track of expenses, use the same account the next period.
Financial statements are prepared with the expectation that a business will remain in operation indefinitely
Maintain all business accounts as if the business will continue all operations indefinitely; if equipment is sold the amount of cash increases but equipment would only be sold if the business stops operations.
The actual amount paid for merchandise or other items bought is recorded
If something is valued at $5,000 but sold at $4,500, the amount sold for is the price recorded.
Historical cost is the amount an item is actually paid or sold for.
The revenue from business activities and the expenses associated with earning that revenue are recorded in the same accounting period.
Matching expenses with revenue results in an accurate net income or loss
If sales are $100,000 and expenses are $85,000, the net income is $15,000.
A source document is prepared for each transaction.
Use an original source for an accurate form of proof for a transaction.
A check is the original business paper for a cash payment.
Revenue is recorded at the time goods or services are sold.
Cash is received at one time in the sell so if a car is $15,000 but has a down payment of $500 and the rest will be paid later, the entire $15,000 is first recorded.
Business transactions are reported in numbers that have common values, that is, using a common unit of measurement.
All values in a business need to be alike so transactions and accounts can be viewed and compared.