Accounting activities for chpt. #1-2

Financial Statement headings

Company "Income statement", "Statement of...","Balance Sheet" Date "for the month ended..." (Balance sheet has just the date)

Credit (Cr)

Decreases amount on account (i.e. Revenue (S/E), Common stock (S/E).)

Company pays $25 dividends to shareholders

Dividends; Financing activity

Costs of Goods Sold (COGS)/ Cost of Sales (COS)

Expense; Income statement

Interest expense

Expense; Income statement

Selling Expenses

Expense; Income statement

Asset(stuff) accounts track the dollar amount of the physical asset and who owns that physical asset.

False

Debit (Dr)

Increases amount on account (i.e. Account receivable (A), Dividend (S/E).)

Accounts Payable (A/P)

Liability; Balance sheet

Notes Payable (N/P)

Liability; Balance sheet

Supplies are ...

NOT a long-term asset

Corporation borrows $100 from bank

Note Payable to bank; Financing activity

We buy a ship to smuggle for $2,000 from Fox Inc. However, since the ship costs ore than the cash we have, we generate a _________ with Fox Inc. Which will be paid out over two years.

Note payable

We obtain financing to invest in assets that we will use to perform our standard (day-to-day) business operations. The expected result of these operations is ________. However, our operations typically had costs, these costs are known as_________.

Revenue; Expenses

Sales/Revenue

Revenue; Income statement

Company provides $250 service to customer

Service revenue earned; Operating activity

Capital stock/Common stock

Stockholders Equity; Balance sheet

Retained Earnings (R/E)

Stockholders Equity; Balance sheet or Retained Earnings Statement

Debit

The left side of the account.an entry made to the left side of an account .

Credit

The right side of the account

Double entry accounting

The rule of accounting that specifics every transaction involved at least two accounts of debits and credits

In traditional accounting system all entries must be first put in the General Journal

True

The credit side of all accounts is the right side

True

The debit side of an asset account is the left side.

True

Equipment is ...

is a long-term asset

Order of financial statements

1-Income statement 2-Statement of retained earnings 3-Balance Sheet 4-Statement of cash flows

Chart of account

A list of all the accounts of a business and the numbers assigned to that account

Promissory note

A written pledge to pay a fixed amount of money at a later date

Company pays $50 on account for associated A/P account

Accounts Payable; Operating activity

Company receives $100 on account for A/R account

Accounts Receivable; Operating activity

The balance sheet is produced from the account balances shown in the trail balance.

True.

Inventories

Asset; Balance sheet

Land and buildings

Asset; Balance sheet

Office furniture

Asset; Balance sheet

Company purchases $50 worth of supplies

Cash; Operating activity

In exchange for cash, we give investors _________ in the company. i.e. ownership rights.

Common Stock

Company receives $300 from investor

Common stock; Financing activity

A company's accounting period must always be one month long.

False.

All entries must affect both the asset side and the liabilities +Equity side of the accounting equation system to stay in balance.

False.

The largest transaction occurring during the accounting period is always entered first in the General Journal.

False.

The note payable account is increased by a debit entry.

False. It is increased by credit entry.

Entries are posted from the general journal to the trail balance.

False. It is posted to the General ledger .

The trail balance lists all of the transactions that were entered into the asset, liability and equity accounts.

False. It shows summaries.

In an accounting system, if total assets are not equal to the total claims-to-assets, then the balance sheet report will simply be relabeled as the UnBalanced sheet

False. No such thing.

(T or F) Profit is what a company receives from the sale of their products.

False. Revenue is what the the company receives from the sale of their products.

The balance sheet is produced from the account balances shown in the General Journal.

False. Shown in the trail balance

After certain types of transactions it is ok for the accounting system to have more total assets (stuff) than total liabilities +Owners Equity(claims to stuff)

False; Fundamental principle says they need to be balanced.

Company purchases $100 of equipment on account

Accounts payable to store; Investing activity

Accounts Receivable (A/R)

Asset; Balance sheet

On account

On Credit (Asset)

T account

An informal account form used to summarize transactions. Where the top of the T holds the account title and the base divides the debit and credit sales of the account .

Cash

Asset; Balance sheet

The main purpose of Equity accounts is to keep track of owners' claims to an organizations assets

True

The main purpose of liability accounts is to keep track of non-owners' claims to an organizations assets.

True

For each entry in the general journal, the total dollar amount of the debits and the total dollar amount of the credits must always be equal.

True.

The balance sheet is a point-in-time financial report.

True.

The equipment account is increased by a debit entry.

True.

The inventory account is decreased by a credit entry.

True.

The primary reason accountants prepare a trail balance is to determine if the accounting system is in balance.

True.

The sequence of steps a company's account system goes through each accounting period is called the accounting cycle.

True.