Summary: Christian Acct

Read the summary and the most important questions on Christian Acct

• 1 What is Accounting, What is GAAP, Accounting assumptions

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• What does communication in accounting involve?

  • Communication involves preparing accounting reports such as financial statements and sharing these information with stakeholders, managers, and creditors.

• What is the cost principle in accounting?

  • Transactions are recorded at their actual cost of transaction.
  • Cost is measured in terms of cash or its equivalent (most liquid asset)
  • The cost principle method ensures that information is objective.
  • Example: If a company buys equipment for $500, it is recorded at $500 regardless of the owner's belief that the equipment is worth $700.

• What does the business entity assumption entail?

  • Each business is a standalone business, not mixed up with other entities.
  • Each business is reported separately from its owners and other businesses.

•   A software company signs a contract on January 1 to deliver a customized software package by March 31 for $15,000. The company delivers the software on May 15, and the client pays the full amount on April 1. When should the company recognize the revenue?

   March 15. Revenue is recognized when the company good or services  are provided; when the software was delivered.

• 1.1.1.1.1 Transactional Analyses 1

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•  How will a software company providing services on credit worth $10,000 be recorded?

   The transaction will be recorded as an increase in accounts receivable and increase in equity.

•    “Adam invests $40,000 cash to start a corporation named Farhat lectures.”

   Cash Went Up, Common Stock went up.

•  "Farhad lectures purchased equipment for $26,000 cash from IBM"

   Equipment (Asset) went up, Cash (Asset) went down

•  “Farhad Lectures purchased additional supplies of $5,100 on credit from Office Depot”

   Supplies (Asset) went up, Accounts Payable (liability) went up

•  “Farhat Lectures provided consultation services to a customer and received $4500 cash right away.”

   Cash (Asset) went up, Revenues (Equity) went up

•  "Farhat Lectures paid rent of $1,200 and salaries of $500 to employees."

   Cash (Asset) went down
  
  Rent Expenses (Expenses went up, Equity Went down.)
  
  Salaries expenses (Expenses went up, Equity Went Down)