SATYA TEGUH

15152120008

Summary Financial & Managerial Accounting:

 Accounting: identifies, records and communicates the economic events relevant to its
business to interested users by means of accounting reports.
 Recording: keeping a systematic, chronological diary of events, measured in dollars
There are two broad groups of financial information:
 Internal users: managers who plan, organize and run the business. Managerial
accounting provides internal reports to help users make decisions about their
companies.
 External users: individuals and organizations outside the company who want financial
information about the company, mainly investors and creditors. Investors use
accounting information to decide whether to buy, hold or sell ownership shares of a
company. Creditors use accounting information to evaluate the risks of granting credit
or lending money. Financial accounting answers these questions.
 External transactions: involve economic events between the company and some
outside enterprise.
 Internal transactions: are economic events that occur entirely within the company
 Basic elements of a business are what it owns and what it owes. Assets are the
resources a business owns (activa). Liabilities are claims of those to whom the
company owes money (creditors). Claims of owners are called stockholders’ equity.
 Assets = liabilities + stockholders’s equity
 Companies prepare 4 financial statements from the summarizes accounting data:
o Income statement: revenues and expenses, net income or net loss in a period of
time.
o Retained earnings statement : summarizes the changes in retained earnings for
a specific period of time.
o Balance sheet: reports the assets, liabilities and stockholders’ equity at a
specific date
o Statement of cash flow: summarizes information about the cash inflows and
outflows for a specific period of time.
 Double-entry system of recording transactions: the dual effect of each transaction is
recorded in appropriate accounts. Helps ensure the accuracy of the recorded amounts
as well as the detection of errors.
SATYA TEGUH
15152120008

 Most companies have a chart of accounts: lists the accounts and the account numbers
that identify their location in the ledger. Usually starts with the balance sheet accounts
and follows with the income statement accounts. Companies leave gaps to permit the
insertion of new accounts as needed during the life of the business.
 Trial balance: a list of accounts and their balances at a given time. Companies prepare
this at the end of an accounting period. The trial balance proves the mathematical
equality of debits and credits after posting. A trial balance may also uncover errors in
journalizing and posting.
 Adjusting entries are classified as either deferrals or accruals.
A. Deferrals: a.prepaid expenses: expenses paid in cash before they are used or
consumed; b. Unearned revenues: cash received before services are performed
B. Accruals: a. Accrued revenues: revenues for services performed but not yet
received in cash or recorded; b. Accrued expenses: expenses incurred but not yet paid
in cash or recorded.
 Book value: the difference between the cost of any depreciable asset and its related
accumulated depreciation. Depreciable asset – cost = book value.
 Unearned revenues: when companies receive cash before services are performed, by
which the liability account is increasing. They are the opposite of prepaid expenses.
The adjusting entry for unearned revenues results in a decrease to a liability account
and an increase to a revenue account
 Classified balance sheet groups together similar assets and similar liabilities, using a
number of standard classifications and sections.
 Assets: current assets, long-term investments, property, plant and equipment and
intangible assets.
 Liabilities: current liabilities, long-term liabilities and stockholders’ equity.

Steps in preparing a worksheet:

1) prepare a trial balance on the worksheet.
2) Enter the adjustments in the adjustments column.
3) Enter adjusted balances in the adjusted trial balance columns.
4) Extend adjusted trial balance amounts to appropriate financial statement columns
5) Total the statement columns, compute the net income and complete the worksheet.