Accounting Study Guide

U.S. GAAP Codification IFRS International Standards Accounting Topics


Components of Financial Statements
Assets, Liabilities, Owner's Equity, Revenues, Expenses, Gains, Losses


U.S. GAAP Codification IFRS Accounting Terms,  Accounting Jobs
Principles of Accounting Intermediate Accounting Advanced Accounting
Accounting Standards ASC Accounting by Topic,  Accounting Textbooks



  Financial Statements Overview
 
Accounting Equation
   Assets = Liabilities + Equity

   Equity = Assets - Liabilities   --->    Assets = Liabilities + Equity

 
  [Example]  
      Company A has $800,000 liabilities and $1,200,000 equity.  
      How much assets does the Company A have?

        Assets = Liabilities + Equity = $800,000 - $1,200,000 = $2,000,000

        Assets = Liabilities + Equity
        Liabilities = Assets - Equity
        Equity = Assets - Liabilities

   From any balance sheet, 
       --> it can be verified that
       --> Total Assets = Total Liabilities + Total Stockholders' Equity.
 
Assets
     Assets are 
        --> probable future economic benefits 
        --> obtained or controlled by an entity 
        --> as a result of past transactions or events. 
                [SFAC No. 6., Para. 25]

    Essential characteristics of assets
        Probable future economics benefits
        Obtained or controlled by an entity
        Result of past transactions or events.

    Common characteristic of all assets
         --> is service potential or future economic benefits
                [SFAC No. 6., Para. 28]
  
Liabilities
      Liabilities are 
          --> probable future sacrifices of economic benefits
          --> arising from present obligations of an entity
          --> to transfer assets or provide services to other entities in the future
          --> as a result of past transactions or events.
                 [SFAC No. 6., Para. 35]

     Essential characteristics of liabilities
        Probable future sacrifices of economic benefits
        Present obligations to transfer assets or provide services in the future
        Result of past transactions or events.
 
Equity
      Equity (or net assets) is 
           --> residual interests in the assets of an entity
           --> that remains after deducting its liabilities.
         
         [SFAC No. 6., Para. 49]

      Essential characteristics of equity
         Equity is residual interests in the assets after deducting liabilities
         Equity = Assets - Liabilities

    [Example]  
       Company A has $2,000,000 assets and $800,000 liabilities.  
       How much equity does the Company A have?

       Equity = Assets - Liabilities 
                 = $2,000,000 - $800,000 = $1,200,000
 
Revenues
      Revenues are 
          --> inflows of assets of an entity or 
          --> settlements of its liabilities (or a combination of both) 
          --> from delivering or producing goods, rendering services.  
  
                  [SFAC No. 6., Para. 78]

      Essential characteristics of revenues
          Inflows of assets or settlements of liabilities
          From delivering goods or rendering services
 
Expenses
      Expenses are 
           --> outflows or other using up of assets or 
           --> incurrences of liabilities (or a combination of both) |
           --> from delivering or producing goods, rendering services.  
                   [SFAC No. 6., Para. 80]

      Essential characteristics of expenses
          Outflows of assets or incurrences of liabilities
          from delivering goods or rendering services
 
Gains
      Gains are 
          --> increases in equity (net assets) 
          --> except those from revenues or investments by owners.
                   [SFAC No. 6., Para. 82]

      Essential characteristics of gains
          Increases in equity from transactions or events
          Except those that result from revenues or investments by owners.
 
Losses
      Losses are 
           --> decreases in equity (net assets) 
           --> except those from expenses or distributions to owners.
                   [SFAC No. 6., Para. 83]

     Essential characteristics of losses
          Decreases in equity from transactions or events
          Except those that result from expenses or distributions to owners.
 
Net Income and Owner's Equity
       Assets = Liabilities + Equity
       Assets = Liabilities + Equity + Revenues - Expenses
       Assets = Liabilities + Equity + Revenues - Expenses + Gains - Losses
             
       Ending Assets = Ending Liabilities + Ending Owner's Equity
       Ending Owner's Equity 
             = Beginning Owner's Equity + Investment by Owner + Net Income

       Net Income = Revenues - Expenses + Gains - Losses
  
       Ending Owner's Equity 
             = Beginning Owner's Equity + Investment by Owner 
                + Revenues - Expenses + Gains - Losses


       Ending Assets 
            = Ending Liabilities + Ending Owner's Equity
            = Ending Liabilities + Beginning Owner's Equity 
               + Investment by Owner + Net Income

            = Ending Liabilities + Beginning Owner's Equity 
               + Investment by Owner + Revenues - Expenses + Gains - Losses

       If Investment by Owner = 0, Gains = 0,  Losses = 0,  then

       Ending Assets = Ending Liabilities + Beginning Owner's Equity 
                               + Revenues - Expenses

       Ending Assets = Ending Liabilities + Ending Owner's Equity

       Assets = Liabilities + Owner's Equity 
   


50 Questions on
   Accounting Journal Entries
   2012 Edition for iPhone and iPad
Create your own eBooks
   from iPhone and iPad
   (for iBooks and Kindle)




  
   Assets are reported on the balance sheet.
   Asset accounts have normal balances on the debit side.
   Increase in assets is reported on the debit side of a journal entry.
   Decrease in assets is reported on the credit side of a journal entry.
   
   Liabilities are reported on the balance sheet.
   Liability accounts have normal balances on the credit side.
   Increase in liabilities is reported on the credit side of a journal entry.
   Decrease in liabilities is reported on the debit side of a journal entry.
   
   Owner's Equity is reported on the balance sheet.
   Owner's equity accounts have normal balances on the credit side.
   Increase in owner's equity is reported on the credit side of a journal entry.
   Decrease in owner's equity is reported on the debit side of a journal entry.
   
   Revenues are reported on the income statement.
   Revenue accounts have normal balances on the credit side.
   Increase in revenues is reported on the credit side of a journal entry.
   Decrease in revenues is reported on the debit side of a journal entry.
   
   Expenses are reported on the income statement.
   Expense accounts have normal balances on the debit side.
   Increase in expenses is reported on the debit side of a journal entry.
   Decrease in expenses is reported on the credit side of a journal entry.
   
   Gains are reported on the income statement.
   Gain accounts have normal balances on the credit side.
   Increase in gains is reported on the credit side of a journal entry.
   Decrease in gains is reported on the debit side of a journal entry.
   
   Losses are reported on the income statement.
   Loss accounts have normal balances on the debit side.
   Increase in losses is reported on the debit side of a journal entry.
   Decrease in losses is reported on the credit side of a journal entry.
   
   Sample Balance Sheet
   Sample Income Statement
   Sample Statement of Cash Flows
   







 
U.S. GAAP Codification
International Financial Reporting Standards (IFRS)
 
Accounting Topics
Inventory Valuation Methods
Depreciation Methods
Revenue Recognition Principle
Accrual Basis vs. Cash Basis Accounting
Basics of Journal Entries
Ratios for Financial Statement Analysis
Overview of Financial Statements









Copyright AccountingStudy.com.TM  All Rights Reserved.