Accounting Final Exam

Accruals

Occurs when revenue has been earned or an expense has been incurred but has not been recorded

Which of the following would NOT be recorded as an accounting transaction? a) receiving a deposit from a customer b) hiring a new employee c( putting a deposit down on a new vehicle d) receiving cash upon signing a note

hiring a new employee

Cost principles (measurement principle)

prescribes that accounting information is bases on actual cost Cost is measures on a cash or equal to cash basis

If an analysis want to examine a company's current ability to generate income, which of the following would be best considered? a) liquidity b) market share c) profitability d) solvency

profitability

Revenue recognition principle

provides guidance on when a company must recognize revenue

t-account

represents a ledger account and is a tool used to understand the effects on one or more transactions

Assets

resources a company owned or controls (receivable)

Segregation of duty means that a company assign responsibilities so that:

responsibilities for related activities are assigned to two or more people

Matching principle (expense recognition principle)

prescribes that a company records the expenses it incurred to generate the revenue reported

full disclosure principle

prescribes that a company report the details behind financial statements that would impact users decisions

How do you find the net income

total revenues-total expenses

What is the minimum number of accounts that must be involved in any transaction?

two

Notes payable

(liability) refers to a formal promise usually denoted but the signing of a promissory note to pay a future amount

Unearned revenue accounts

(liability) refers to a liability that is settled in the future when a company delivers its products or services

accounts payable

(liability) refuse to oral or implied promises to pay later, which usually arises from purchases of merchandise, supplies, equipment, and services

What belongs on a balance sheet and in what order?

1. Assets 2. Liabilities 3. Stockholders equity

what is the correct sequence for the accounting cycle

1. Prepare journal entries 2. Post to t-accounts 3. Prepare trial balance 4. Prepare financial statements

What are some examples of assets?

Cash, inventory,supplies, land, buildings, equipment, prepaid insurance, trade names

Trial Balance

a list of accounts and their balances for the double-entry accounting

current ratio

a measure of a firms ability to pay its current liability

Ledger

a record containing all accounts used by a company Classifies as either an asset, liability, or stockholder's equity

Liability Accounts

accounts payable, notes payable, unearned revenue, accused liabilities

Which account would be increased with a debit? a) accounts receivable b) retained earnings c) common stock d) notes payable

accounts receivable

What belongs on the Statement of retained earnings

add net income then subtract dividends

Accused liabilities

amounts owed the are not paid yet Ex) wage payable, taxes payable, and interest payable

accounting systems

analyze, record, and summarize the activities affecting it's financial condition

Supplies accounts

are assets until they are used which then are recorded as an expense

equipment accounts

are assets until they are used which then are recorded as an expense

contra-asset account

asset account where the balance with either be a credit balance or a zero balance

The accounting equation

assets=liabilities +Stockholder equity

Sarbanes-Oxley Act

passed by the congress in response to financial statement frauds that occurred in the early 2000s

Temporary Accounts

balances of accounts that are not carried over because they relate only to one period

Why is inventory reported as a current asset?

because it will be converted into cash within a year of the balance sheet date

Current assets

cash and other assets that are to be converted to cash or sold or used up usually within one year or less

assets accounts

cash, accounts receivable, notes receivable, prepaid accounts, supplies accounts, equipment accounts, building accounts, land

Which of the following is not an asset? a) Land b) Common Stock c) notes receivable d) cash

common stock

Which of the following would NOT be reported as a liability on the balance sheet? a) notes payable b) salaries and wages payable c) accounts payable d) common stock

common stock

accumulated depreciation is classified as a(n)

contra-asset account

a weak system of internal _______ provides the ________ to commit fraud

controls, opportunity

liabilities

creditors claims on assets (payable)

Depreciation

decrease in the usefulness of the equipment

Income statement

describes a company revenues and expenses along with the resulting net income or loss over a period of time due to earnings activities

Balance sheet

describes a company's financial position/types and amounts of assets, liability, and equity at a point in time

how do you get dividends

divide dollar value of the annual dividend by the current share price

Which of the following is typically NOT a benefit of corporations over other organizational forms? a) easier to raise large amounts of money b) easier to create with few legal fees c) easier to limit an owner's liability d) easier to transfer ownership

easier to create with few legal fees

Which of the following is NOT a current asset? a) supplies b) prepaid insurance c) cash d) equiptment

equiptment

A cost of doing business is a(n) __________ and it is necessary to earn _________

expense, revenue

Statement of owner's equity

explains changes in equity from net income (or loss) from any owner investments and withdrawals over periods of time

Journal

gives a complete record of each transaction on one place

beginning inventory+purchases=

goods available for sale

fixed assets

physical resources that are owned and used by a business and are permanent or have a long life

Statement of Cash Flows

identifies case inflows (recites) and cash outflows (payment) over a period of time

which of the following requires a credit? a) increases to assets b) decreases in liabilities c) decreases in SE d) increases to liabilities

increases to liabilities

Creditors

individuals that have rights to receive payments from a company

Business entity assumption

means that a business is accounted for separately from another business entities, including its owner

monetary unit assumption

means that we can express transaction and events in many or monetary units

"Better buy" purchases computers from companies like Hewlett Packart and IBM and sells them to customers Better boy is a ....

merchandising company at the retail level

Repayments of loans will be reported as..

negative cash flow under financing activities

examples of liabilities ?

notes payable, accounts payable, wages payable, unearned liabilities

Deferrals

occurs when cash related to a future revenue or expense has been initially recorded as a liability or an asset

net loss

occurs when expenses exceed revenues

net income

occurs when revenues exceed expenses

Equity Accounts

owner investments, owner withdrawals, revenue accounts, expense accounts

Accrual basis of accounting

revenues are reported on the income statement in the period in which a service has been performed or a product has been delivered

What goes on in the income statement and in what order

revenues, expenses, net income

within the debit/credit framework, the best interpretation of the word "credit" is:

right side of the account

accused expenses

the amount of accused but unpaid items at the end of an accounting period

For a manufacturer, inventory turnover refer to how many times:

the company produces and delivers its inventory of goods to customers

Expenses

the cost necessary to earn revenues

Account balance

the difference between total debts and total credits for an account including any beginning balance

equity

the owners claim to assets

revenues

the sale of products or services to customers