ACC1000 Principles of Accounting and Finance Cheatsheet - Key Accounting Concepts

Oct 13, 2026

ACC1000 principles summary covering foundational accounting and finance ideas used to interpret financial statements for economic decision-making. Key topics include assumptions of financial accounting, qualitative characteristics of information (understandability, relevance, reliability), and business entity types. It explains accounting elements via the accounting equation, distinguishes accrual vs cash accounting, and outlines the accounting cycle steps. It also summarizes trading firm inventory recording (perpetual/periodic), common adjusting entries, and essential financial statements: income statement, balance sheet, and statement of cash flows.

LanguageEnglish

CategoryGeneral

FormatPDF

Pages3

Reading Time1 min

AccessFree to download

1 Introduction to Accounting

Assumptions and qualitative characteristics

Business entities

2 The Elements of Accounting

Accounting equation and accrual vs cash accounting

Debit/credit effects and balances

3 Revisiting the Recording Process

Accounting cycle and financial statements

4 Trading Firms and Inventory Recording

Physical/periodic method and COGS formula

5 Adjusting the Accounts

Expiration, unearned/accrued items, contra accounts, depreciation

6 Preparing Financial Statements

Income statement, balance sheet, statement of cash flows

7 Inventory – Retail Operations

FIFO

ACC1000: Principles of Accounting and Finance Monash University 1 Introduction to Accounting Users-People that depend on and use the financial information (provided by financial statements) to make economic decisions. • Assumptions of Financial Accounting – • Accrual Accounting • Going Concern • Monetary unit • Accounting Period • Historical Cost Qualitative Characteristics – • Understandability • Relevance o Materiality • Reliability o Fair representation (represent what really existed/happened) o Neutrality (freedom from bias) o Substance over form (reflects the economic reality) o Prudence (caution in estimates) o Completeness (material info not omitted, not misleading) • Comparability Business Entities: Sole Proprietor, Company/Corporation, and Partnership 2 The Elements of Accounting Accounting Equation – A = L + SE Asset: Definition: Resource controlled, Provide future economic benefit, Result of past event Recognition: Probable economic benefit, Reliably Measured Liability: Definition: Present Obligation, Outflow of future economic benefit, Result of past event Recognition: Probable outflow of economic benefit, Reliably Measured Shareholders’Equity: Definition: Residual Interest Accrual Accounting – Record economic impact of transaction as they occur Cash Accounting – Record impact of transaction at time of cash flow | | A | L | Rev. | Exp. | SE | | --- | --- | --- | --- | --- | --- | | Increase | DR | CR | | | CR | | Decrease | CR | DR | | | DR | | Balance | DR | CR | CR | DR | CR | 3 Revisiting the Recording Process The Accounting Cycle: 1) Source Document 2) Journal Entries 3) Post to Ledger 4) Pre-Closing Trial Balance 5) Adjusting Entries 6) Adjusted Trial balance 7) Closing Entries 8) Post-Closing Trial Balance 9) Financial Statements 4 Trading Firms and Recording of Stock using the Physical or Periodic Method Perpetual Inventory System-Continually records the impact of transaction on COGS and Inventory control accounts. Purchase Returns and Allowances – DR Inventory CR Cash/ Accounts Payable OR DR Purchase Returns and Allowances CR Accounts Payable Sales Returns or Allowances – DR Sales Returns and Allowances CR Cash/ Accounts Receivables DR Inventory CR COGS Write –off: DR inventory write-down CR COGS Periodic Inventory System – Need to deduce COGS using the formula: COGS = O/B INVENTORY + PURCHASES-C/B INVENTORY (AFTER A END OF YEAR Stock take) . Purchase Returns and Allowances DR Cash/ Accounts payable CR Purchase Returns and Allowances Sales Returns and Allowances Sales Returns or Allowance: DR Sales Returns and Allowances CR cash/ accounts receivable 5 Adjusting the Accounts Expiration of Assets DR Insurance Expense CR Prepaid Insurance Unearned Revenue DR Unearned Revenue CR Service Revenue Accrual of Unrecorded Revenue DR Accrued Revenue CR Service Revenue Accrual of Unrecorded Expenses DR Wages expense CR Accrued Wages Contra Account-Are accounts that record any detraction from the historical cost of an asset or liability control account Allowance for Doubtful Debt Creating Allowance for Doubtful Debt DR Bad Debt Expense CR Allowance for Doubtful Debt Writing Off Bad Debt DR Allowance for Doubtful debt CR Accounts Receivable Depreciation DR Depreciation Expense CR Accumulated Depreciation Closing Entries-Temporary accounts are closed to leave them with zero balances in preparation for the next reporting period. Post Closing Trial Balance-Lists all permanent accounts and their balances. Prepare Financial Statements – • Prepare Balance Sheet • Income Statement • Statement of Cash Flows 6 Preparing Financial Statements Income Statement – Revenue: Inflows of economic benefits (as a result of ordinary operating activities) that result in an increase in total equity (not attributed to owners contributions) . Expenses: outflow of economic ben

FAQs

What does the accounting equation express, and what are its components?

It states A = L + SE, where assets equal liabilities plus shareholders’ equity (residual interest). Assets and liabilities are defined through controlled resources and present obligations arising from past events.

How do accrual accounting and cash accounting differ?

Accrual accounting records the economic impact of transactions as they occur, while cash accounting records impacts at the time of cash flow.

What are the key steps in the accounting cycle?

The cycle includes source documents, journal entries, posting to the ledger, pre-closing trial balance, adjusting entries, adjusted trial balance, closing entries, post-closing trial balance, and preparing financial statements.

Oct 13, 2026

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