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Assets Things company owns & uses to generate revenue Liabilities Amount that company owes Equity Amount invested in company by owners; owners claim no assets Accounting equation

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Assets

Things company owns & uses to generate revenue

Liabilities

Amount that company owes

Equity

Amount invested in company by owners; owners claim no assets

Accounting equation

Assets = liabilities + equity

Truism in business

Company never receives greater than it gives & never gives greater than it receives

4 Rules of debits & credits

1. Debit amount received; credit amount given up
2. Debuts on left; credits on the right
3. In each transactions; list debits first (good) & credits last (bad)
4. Total debits = total credits

Making an ethical decision

1. Identify ethical concerns- use personal ethics to recognize concern
2. Analyze options- consider all good & bad consequences
3. Make ethical decision- choose best option given circumstances

Fraud

Intentional manipulation- focus on prevention. Once fraud is committed, loses are rarely retrieved.

Fraud Triangle

Opportunity (low risk of being caught), Financial Pressure (incentive), Rationalization (making situation justifiable)

GAAP (generally accepted accounting principles)

Financial accounting is governed by concepts & rules.
1. Relevant info affects decision of user
2. Reliable info trusted by users
3. Comparable info aids in contrasting organizations

SEC- Securities and Exchange Commission

Federal agency congress has charged to set reporting rules for org that sell ownership shares to public

FASB (Financial Accounting Standards Board)

Independent group of full-time members responsible for setting accounting rules

IASB (international accounting standards board)

Group that identifies preferred accounting practices & encourages global acceptance; issues IFRS

Measurement/cost principle

 
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