Accounting Final

When preparing your statements what is 1,2,3,4?

(Before these 4 steps, must do journalize the transactions and do T accounts) 1. Trial Balance 2. Income Statement 3. Statement of Retained Earnings 4. Balance Sheet

A company using the perpetual inventory system purchase inventory worth $550, 000 on account with credit terms of 2/15, n/45. Defective inventory of 70,000 was returned three days later and the accounts were probably adjusted. If the company pay the invoice 25 days later, the journal entry to record the payment would be

480,000 debit to Accounts Payable and 480,000 credit to cash you would do 550,000-70,000

Account

A detailed record of all increases and decreases that have occurred in a particular asset, liability, or equity during a period

Compound journal entry

A journal entry that is characterized by having multiple debits and/or multiple credits

Chart of accounts

A list of all accounts with their account numbers

Trial balance

A list of all accounts with their balances at a point in time

Journal

A record of transactions in date order

Which is usually longer? Accounting cycle, revenue cycle, operating cycle, matching cycle?

Accounting cycle

represents the right to receive cash in the future from customers for goods sold or for services perfoemed

Accounts Receivable

A company that uses a perpetual inventory system purchase inventory on account and later return goods worth $500 to the vendor. Which of the following would be the correct journal entry to record these returns?

Accounts payable 500 debit, merchandise inventory 500 credit

Which of the following statements is true of accrual basis accounting? A. Accrual basis the county records expenses only one cat has been paid for them B. Accrual basis accounting is required by the generally excepted accounting principles (GAAP) C. Accrual basis accounting records revenue only when cash is received D. Accrual basis accounting always results in greater net income then cash basis accounting

Accrual basis accounting is required by generally excepted accounting principles GAAP

This report can be used to prepare financial statements Unadjusted trial balance, adjusted trial balance, post closing trial balance, statement of financial position

Adjusted trial balance

The company hired on October 31 to perform services for six months at 3000 per month. Fiscal year ends December 31 A. Adjusting entry involves $3000 credit to revenue B. Adjusting entry involves 18,000 C. Adjusting entry involves 6000 credit to revenue D. No adjusting entry because revenue was not earned

Adjusting entry involve $6000 credit to revenue

Asset

An economic resource that is expected to be of benefit in the future

Office Supplies Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Asset, Debit, NB: Debit

Prepaid Rent Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Asset, Debit, NB: Debit

What is the Accounting Equation?

Assets= Liabilities+ Equity

Return on Assets Equation (ROA)

Average on the 2 total Assets (Add them together then divide by how many there are usually 2) then do Net Income/ Average of Total Assets

Which is True of Sole Proprietorship? A: Have to pay Business income taxes b: they are personally liable for the liabilities of the business c: joins 2 or more individuals as co-owners d: is taxed seperately from the owner

B: They are personally liable for the liabilities of the business

The four types of adjusting entries include all except A: defereed expense B: accrued cash C: deferred revenue D: accrued revenue

B: accrued cash missing accrued expense

Real accounts appear on the Balance sheet, closing statement, income statement, income summary

Balance sheet

Net Income for beginning and end of year

Beginning Assets + Ending Assets - Beginning Liabilities- Ending Liabilities= NET INCOME

Total Long-Term Assets

Building, Furniture, Land

Total Current Assets

Cash, Office Supplies, Prepaid Insurance, Accounts Recievable

Equity is?

Common Stock-Dividends+Revenues-Expenses

Which of the following states at the business should use the same accounting methods from period to period A. Consistently principal B. Materiality concept C. Conservatism D. Disclosure principle

Consistency principal

How is current ratio calculated?

Current Assets/ Current Liabilities

Journalising Accounts

Date | Accounts | Debit | Credit

Liability

Debts that are owed to creditors

Expense

Decreases in equity that occur in the course of selling goods or services

What appears on both the statement of retained earnings and the balance sheet?

ENDING retained earnings

A business purchases equipment for $8,000 cash. Which of the following accounts is debited?

Equipment

Common Stock Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Equity, Credit, Credit

Interest Revenue Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Equity, Credit, NB: Credit

Service Revenue Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Equity, Credit, NB: Credit

Advertising Expense Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Equity, Debit, NB: Debit

Dividends Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Equity, Debit, NB: Debit

Utilities Expense Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Equity, Debit, NB: Debit

T accounts

Ex: Cash ________ D$ | C$

Net loss

Excess of total expenses over total revenues

Net income

Excess of total revenues over total expenses

In an accounting cycle, an analysis of transactions is performed at the end of each accounting period.

False

T or F? Only temporary accounts appear on the post-closing trial balance

False

T or F? Under cash basis accounting, revenue is recorded when it is earned, regardless of when cash is received.

False

Under cash basis accounting revenue was recorded when it is earned, regardless of when cash is received true or false

False

T or F? Grace Paper Company has a debt ratio of 25%, which means that 75% of the assets are financed by creditors

False creditors should be replaced by equity component the debt ratio = 25% creditors

True or false only temporary accounts appear on the post closing trial balance

False permanant

T or F? In a corporation, the board of directors is elected by the chairperson of the company

False the shareholders elect them

The Time Period Concept states that A. All expenses should be recorded when they are incurred during the period B. Company should record revenue when it has been earned C. Expenses incurred during a period should be matched against the revenues of the period D. Financial statements can be prepared for specific periods

Financial statements can be prepared for specific periods

Which of the following financial statements reports expenses in decreasing order of their amounts?

Income Statement

Revenue

Increases in equity that occur in the course of selling goods or services

Debit

Left side of a T-account

The Salaries Payable account is an

Liability with a normal credit balance

Accounts Payable Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Liability, Credit, NB: Credit

Unearned Revenue Asset/Liability/Equity? Credit/Debit? Normal Balance side?

Liability, Credit, NB: Credit

Buildings, Land, Equipment are considered long or current assets?

Long-term assets

The classified balance sheet includes which category? A. Accounts Receivable B. Long-term liabilities C. Bonds D. Retained earnings

Long-term liabilities

a business borrows cash by signing a note payable, which account is credited?

Notes payable

This account must be adjusted to the passage of time. Prepaid insurance unearned revenue accounts receivable or office supplies

Prepaid insurance

The gross profit percentage is one of the most carefully watch measures of

Profitability

Stmt. of ret. earnings

Report how the company's ret. earnings balance changed from the beg. to the end of the period.

Stmt. of cash flows

Reports on a business's cash receipts and cash payments during a period

Balance sheet

Reports on an entity's assets, liabilities, and stockholders' equity as of a specific date

Income statement

Reports on an entity's revenues, expenses, and net income or loss for the period

Credit

Right side of a T-account

Staff work December 2016 and were paid January 2017. Which should appear on the income statement for the year? Salary expense salaries payable prepaid expense or maintenance expense

Salaries expense

Which of the following accounts will be close by debiting the income summary account?

Salaries expense

Normal balance

Side of an account where increases are recorded

The explanation of why the net income differs from the change in cash balance for the period is explained in the which financial statement

Statement of Cash Flows

******Which financial statement shows the dividends distributed to stockholders?

Statement of Retained Earnings

Understated means

The amount is not the correct amount, and the amount is less than the true amount. In other words, the amount is too small.

Accounting equation

The basic tool of accounting, stated as Assets = Liabilities + Equity

Ledger

The record holding all the accounts of a business, the changes in those accounts, and their balances

Overstated means

The reported amount is incorrect, and the reported amount is more than the true or correct amount.

The accountant of Zeus Legal Services failed to make an adjusting entry for supplies that had been used for the year. Assume the supplies were initially recorded as an asset. Which of the following statements is true?

The total assets will be overstated

When analyzing a current ratio, what is the rule of thumb?

Though the ideal current ratio depends to some extent on the type of business, a general rule of thumb is that it should be at least 2:1

4. Balance Sheet

Top of Page Center: Title of Company Balance Sheet Month Day, Year List in 3 separate columns Left side: Right side: Assets Liabilities List account titles List account titles Total Assets Total Liabilities Stockholders Equity Retained Earnings: Common Stock: Total Stockholders Equity: Total Liabilities and Stockholders Equity: (Assets side and Total L and SE should be same amount)

2. Income Statement

Top of Page Center: Title of Company Income Statement Month Ended on Month Day, Year Revenues: list the different ones (Service Revenue) Expenses list the different ones (Utilities Expense) Total Expenses: (if more than one expense) Net Income: (revenues- expenses) ________

3. Statement of Retained Earnings

Top of Page Center: Title of Company Statement of Retained Earnings Month Ended on Month Day, Year Retained Earnings (starting $) usually $0 Net Income for the month (from income statement) ADD Dividends Retained Earnings (END of month)--- (Subtract dividends from NI and RE(starting) ________

1. Trial Balance Format

Top of Page in Center: Title of Company Trial Balance Month Day, Year 3 columns: Account Title- Debit- Credit List the titles and amounts then add each side up MUST BE SAME NUMBER ON BOTH SIDES

5. Debt Ratio

Total Liabilities/ Total Assets= Debt Ratio

The accountant for Belden Jewelry Repair Services, Inc. forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error?

Total assets are overstated

Posting

Transferring amounts from the journal to the ledger

T or F? Assets are something of value that the business owns or has control of.

True

T or F? Balancing errors can be detected by computing the difference between total debits and total credits on the trial balance.

True

T or F? Equity increases when revenues are earned.

True

T or F? In a balance sheet, assets are classified as either current or long-term depending on their liquidity.

True

T or F? The normal balance of an account is the increase side of an account

True

Which part of the accounting cycle is optional? Closing entries, adjusted trial balance, worksheet, cash cycle?

Worksheet

Which is true of Common Stock? a: equity account that has a normal credit balance b: equity account that has a normal debit balance c: Liability account that has a normal debit balance d: Liability account that has a normal credit balance

equity account that has a normal credit balance

Time Period Concept States?

financial statements can be prepared for specific periods

The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the

matching

What does current ratio measure?

measure a company's liquidity or ability to pay off short-term debts.

Which is true of Accrual Basis Accounting? -records expenses only when cash has been paid for them - required by Generally Accepted Accounting Principles (GAAP) - records revenue only when cash is received - always results in greater net income than cash basis accounting

required by the GAAP

The matching principle requires A: statements to be prepaired with 2 years of data B: revenues be recorded when collected C: that revenues and expenses be recorded in the same period D: expenses match price periods

that revenues and expenses be recorded in the same period