Accounting chapter 1-2

False

All of the steps in the accounting cycle are performed only at the end of the accounting period performed only at the end of the accounting period

Manufacturing companies

Buy raw materials, convert them into products, and then sell those products to other companies or to final consumers, such as General Motors, Dupont products.

Service Companies

Perform services for a fee, such as, doctors, lawyers and CPAs.

Merchandising Companies

Purchase goods that are ready for sale and then sell them to customers, such as retail and supermarkets

Statement of Cash Flows

Shows the cash inflows and cash outflows from operating, investing, and financing activities.

Balance sheets

Statement of financial position, list's the company's assets, liabilities, and stockholders equity as of a specific moment in time.

True

The balance sheet contains the same major headings as appear in the accounting equation

Statement of retained earnings and balance sheet

The ending balance in retained earnings is shown in the

False

The income statement shows the possibility of the company and is dated as of a particular day, such as December 31, 2012

True

The statement of retained earnings shows both the net income for the period in the beginning and ending balances of retained earnings

False

The three forms of business organizations are single proprietorship, partnership, and trust

True

The three types of business activity are service, merchandising, and manufacturing

Assets

Things of value owned by the business. To their owners, assets possess service potential or utility that can be measured and expressed in money terms.

Both accounts receivable and retain earnings increase

When services are performed on account, which is the fact

Both assets and stockholders equity increase

When the stockholders invest cash in the business what is the effect

Assets plus stockholders equity equals liabilities

Which of the following is not a correct form of the accounting equation

Inflation accounting concept

Which of the following is not one of the five underlining assumptions or concepts mentioned in the chapter

journal

a chronolgical record of business transactions; the simplest form of journal is the two-column general journal.

trial balance

a listing of the ledger accounts and their debit or credit balances to determine that debits equal credits in the recording process.

Account cycle

a series of steps performed during the accounting period to analyze, record, classify, summarize, and report useful financial information for the purpose of preparing financial statements.

Profitability

ability to generate income, the income statement reflects a company's profitability

Retained Earnings

accumulated net income less dividend distributions to stockholders.

Net Income

amount by which the revenues of a period exceed the expenses of the same period.

accounts receiveable

amounts due from customers for services already provided

Notes payable

amounts owed to parties who loan the company money after the owner signs a written agreement for the company to repay each loan.

accounts payable

amounts owed to suppliers for goods or services purchased on credit

t accounts

an account resembling the letter T, which is used for illustrative purposes only. Debits are entered on the left side of the account, and credits are entered on the right side of the account

Accounting Equation

assets- Equities; or Liabilities + stockholder's equity.

Equities

broadly speaking, all claims to, or interests in, includes liabilities and stockholders equity.

Transaction

business activity or event that causes a measurable change in the items in the accounting equation.

Liabilities

debts owed by a business or creditors equity. Examples; notes payable, accounts payable.

Income Statement

financial statement that shows the revenues and expenses and reports the profitability of a business organization for a stated period of time. Sometimes called an earnings statement.

Revenue

inflows of assets resulting from the sale of products or the rendering of services to customers

Corporation

is a business incorporated under the laws of a state and owned term-11 by a few stockholders or by thousands of stockholders

Single Proprietorship

is an unincorporated business owned by an individual and often managed by that same person

Partnerships

is an unincorporated business owned by two or more persons associated as partners.

accrual basis of accounting

recognizes revenues when sales are made or services are performed regardless of when cash is received. Recognizes expenses as incurred, whiter or not cash has been paid out.

posting

recording in the ledger accounts the information contained in the journal

journal entry

shows all of the effects of a business transaction as expressed in debit and credit and may include an explanation of the transaction

journalizing

step in the accounting recording process that consists of entering the effects of a transaction in a journal

debit balance

the balance in an account when the sum of the debits to the account exceeds the sum of the credits to that account.

ledger

the complete collection of all of the accounts of a company; often referred to as the general ledger

chart of accounts

the complete listing of account titles and account numbers of all the accounts in the ledger; somewhat comparable to a table of contents.

debit

the left side of any account; when used as a verb, to enter a dollar amount on the left side of an account; debits increase asset, expense, and dividends accounts and decrease liability, stockholders equity, and revenue accounts.

Stockholder's Equity

the owners interest in a corporation.

credit

the right side of any account; when used as a verb, to enter a dollar amount on the right side of an account, credits increase liability, stockholders equity, and revenue accounts and decrease asset, expense, and dividends accounts.

Capital Stock

the title given to an equity account showing the investment in a business corporation by its stockholders.