Accounting Principles and Business Transactions Cheat Sheet by thuhuong

Generally Accepted Accounting Principles (GAAP) allow investors and other users to compare one company to another.

The Securities Exchange Commission (SEC), a US government agency, has authority over accounting and financial inform­ation for companies whose shares of stock are traded and sold to the public.

Intern­ational Accounting Standards Board issues Intern­ational Financial Reporting Standards (IFRS) which is different from the FASB.

- cash

- buildings

Rights are divided into 2 types:

- rights of the owners (owner's equity)

- own by one individual

- resources are limited to owner

- combined skills and resources

- a separated legal tax entity

- ownership divided into shares (stock)

- used by large businesses

- combines partne­rship & corpor­ation

- tax and legal liability advantages

Amounts are recorded in accounting records at their cost or purchase price.

object­ivity concept requires the amount be based upon objective evidence where the final agreed upon amount has been establ­ished.

unit of measure concept requires the economic data be recorded in dollars.

Business transa­ctions are defined as an economic event or condition that DIRECTLY changes an entity's financial condition or even it's operat­ions.

All business transa­ctions can be stated in terms of changes in the elements of the accounting equation.

- effect is either an increase (+) or decrease (-) in the equation elements

- stockh­older's equity is increased (+) by amounts invested by stockh­olders

- stockh­older's equity is decreased (-) by dividends paid to stockh­olders

- Capital Stock

Capital stock is shares of ownership distri­buted to investors of corpor­ations.

Also see the Nature and Business of Accounting for use in conjun­ction with this sheet http:/­/ww­w.c­hea­tog­rap­hy.c­om­/th­uhu­ong­/ch­eat­-sh­eet­s/n­atu­re-­of-­bus­ine­ss-­and­-ac­cou­nting/.