Accounting 1 Final Exam

Unearned Revenue is always...?

A liability

The right side of an account is used to record...?

Credits

Journalize sale of Treasury Stock

DEBIT: cash CREDIT: treasury stock paid in capital, treasury stock

Journalize purchase of Treasury Stock

DEBIT: treasury stock CREDIT: cash

The left side of an account is used to record...?

Debits

What do closing entries accomplish?

-transfers revenues, expenses, & dividends to RE - Zero's out the revenues, expenses, & dividends to prepare these accounts for the next accounting period -brings the RE account to its correct ending balance

Straight- Line Depreciation Formula

[ (Cost- Residual Value) / useful life in years] X (months in use / 12 months)

What type of account is Treasury Stock?

a contra-equity account

Treasury Stock

a corporations own stock that it reacquires

Corporation

an organization form that can have an indefinite life

Sole Proprietorship

an organization form with a single owner

Partnership

an organization form with two or more owners

Fiscal Period

any consecutive 12 month period

Transaction

any event that affects a firm's financial position

Par Value

arbitrary amount assigned to a share of stock at time of incorporation

Ending Retained Earnings Formula

beg.RE + net income - dividends

Depreciation Expense

building, furniture, and land improvments

Retained Earnings

capital earned through profitable operation of the business

Paid-In Capital

capital from investments by the stockholders

Quick Assets Formula

cash + short-term investments + net receivables

An asset is classified as current if it will become...?

cash, be sold, or be used up within 12 months

Example of Stockholders' Equity

common stock, dividends, etc.

Payment of Dividends

financing (decrease)

Payment of long-term Note Payable

financing (decrease)

Purchase of Treasury Stock

financing (decrease)

Proceeds from insurance of Common Stock

financing (increase)

What inventory costing method assigns the newest, most recent, costs incurred during the period to ending inventory?

first-In, first out (FIFO)

Amotorization Expense

franchises, patents, copyrights, and trade marks

Gross Profit % Formula

gross profit / net sales revenue

Purchase of Equipment

investing (decrease)

Proceeds from sale of Land

investing (increase)

"We record transactions first in a _____. Then we post, or copy, the data to the _____. It is helpful to list all the accounts with their balances on _______."

journal; ledger; trial balance

Earnings Per Share Formula

net income / average # of shares outstanding

Net Income % Formula

net income / net sales revenue

What are the 3 main categories of cash flows reported on a cash-flow statement? (order of importance)

operating investing financing

Current Assets

operating (decrease)

Current Liabilities

operating (decrease)

Depreciation Expense

operating (increase)

Stockholders' Equity

paid- in capital PLUS retained earnings

What are the two basic sources of Corporate Capital?

paid- in capital and retained earnings

The Statement of Cash Flows helps predict future cash flow by reporting ______ cash ________ and ________, which are good predictors of future cash flows.

past; receipts ; payments

Dividends

payment of cash to the owners of a corporation

What 3 things are necessary for fraud to occur?

perceived pressure perceived opportunity rationalization

Quick Ratio Formula

quick assets / current liabilities

Matching Principle

records expenses when incurred to sell goods or provide services

Accrual- Basis Accounting

records the impact of a business event as it occurs regardless of whether the transaction affected cash

Net Sales Revenue Formula

sales revenue - sales returns- sales discount

Example of Revenue

service revenue, etc.

Generally Accepted Accounting Principles

standards developed by FASB

Business Entity Principle

states that an organization that stands as a separate economic unit must not have its financial affairs confused with that of other entities

Reliability Principle

states that data must be verifiable

Cost Principle

states that the acquired assets and services should be recorded at their actual cost

Revenue Recognition Principle

states that you must record revenue only AFTER you've earned it

Outstanding Stock

stock in the hands of stockholders

Preferred Stock

stock that gives its owners certain advantages over common stockholders, such as the right to receive dividends before the common stockholders

Common Stock

the basic form of capital stock

Legal Capital

the portion of stockholders' equity maintained for the protection of creditors

Example of Liabilities

accounts payable,etc.

Examples of what's on a Balance Sheet

accounts receivable, notes payable, retained earnings (also on Statement of RE), office supplies, etc.

Example of Assets

accounts receivable, office supplies, cash, land, prepaid rent, etc.

Examples of what's on an Income Statement

advertising expense, service revenue, etc.

Liabilities

debt owed to outsiders

Land DOES NOT ...?

deplete, depreciate, or amortize

Disadvantage of organizing as a Corporation

double taxation

Advantages of a Corporation

ease of transferring ownership indefinite life limited stockholder liability

Assets

economic resources of the business (what you own or control)

Current Ratio Formula

total current assets / total current liabilities

What is the term for a company's own stock that is issued and repurchased?

treasury stock

Example of Expense(s)

utilities expense, lease expense, salaries expense, rent expense, etc.