Accounting Test #1
Current Liabilities
A/P, Interest Payable, Notes Payable, Utilities Payable, Salaries Payable, and Unearned Revenue are all
Fiscal Year
Any twelve month period
Time Period Concept
Assumes that a business's activities can be sliced into segments and that financial statements can be prepared for specific time periods, such as month, quarter, or year
Unearned Revenue, Rent Revenue
August 1, a business collected $3,300 rent in advance, debiting Cash and crediting Unearned Revenue. the tenant was paying one year's rent in advance. At December 31, the business must account for the amount of rent it has earned
Cash, Notes Payable
Borrowed $23,000 from the bank for business use
Current Assets
Cash, A/R, Office Supplies, Prepaid accounts are all
Retained Earnings, Dividends
Close the Dividends accounts
Income Summary, Retained Earnings
Close the Income Summary
Service Revenue, Income Summary
Close the Service Revenue account
Income Summary, Expense accounts
Close the expense accounts
Accounts Receivable, Service Revenue
College Park billed customers, $6,000, for welding services performed.
Unearned Revenue, Service Revenue
College Park had earned $3,200 of unearned revenue.
Interest Expense, Interest Payable
College Park had incurred (but not recorded) $150 of interest expense on a note payable. The interest will not be paid until February 28.
Chart of Accounts
Companies typically maintain a listing of all of the accounts that they use in their accounting system, often numbered and grouped by account type
Intangible
Copyright, patent
Financial Accounting Standards Board
Creates the rules and standards that govern financial accounting
Liabilities, Revenues, and Common Stock
Credits go up in these accounts
Assets, Expenses, and Dividends
Debits go up in these accounts
Salaries Expense, Salaries Payable
Each Monday, College Park pays employees for the previous week's work. The amount of weekly payroll is $5,600 for a seven-day workweek (M-Sun). This year December 31 falls on Thursday.
Depreciation Expense, Accumulated Depreciation
Equipment depreciation was $300
Matching Principle
Expenses are recorded when they are incurred during the period; Expenses are matched at the end of the period against the revenues for that period
Financial Accounting
External Decision Makers
Plant Assets
Furniture, Buildings, Land, Accumulated Depreciation, Equipment, Vehicles, are all
Accounting
Information system that measures business activities, processes the information into reports, and communicates the results to decision makers.
Managerial Accounting
Internal Decision Makers
Cash, Common Stock
Investors contributed $8,000 to the corporation in exchange for common stock
Generally Accepted Accounting Principles
Issued by the FASB, establishes the rules for recording transactions and preparing financial statements
Long-Term Liability
Notes Payable is a
Insurance Expense, Prepaid Insurance
On March 1, when the business prepaid $600 for a two-year insurance policy, the business debited Prepaid Insurance and credited Cash.
Accounts Receivable, Service Revenue
On October 1, Arlington agreed to provide a four-month air system check (beginning October 1) for a customer for $3,200. Arlington completed the system check every month but payment has not yet been received and no entries have been made.
Securities and Exchange Commission
Oversees the US financial markets
Prepaid Insurance, Cash
Paid $1,200 cash for a 12-month insurance policy starting on October 1
Wages Expense, Cash
Paid $200 for wages to employees
Office Supplies, Cash
Paid $300 for office supplies
Rent Expense, Cash
Paid $800 for rent
Salaries Expense, Cash
Paid assistant's semimonthly salary, $1,490
Dividends, Cash
Paid cash dividends of $6,700
Accounts Payable, Cash
Paid for the furniture purchased on September 4 on account
Rent Expense, Cash
Paid monthly rent on medical equipment
Cash and Office Furniture, Common Stock
Parker opened an accounting firm by contributing $14,000 cash and office furniture with a fair market value of $5,200 in exchange for common stock. Prepare a compound entry.
Accounts Receivable, Service Revenue
Performed services for a hotel and received its promise to pay the $1,000 within one week
Trial Balance
Primary purpose is to prove the mathematical equality of debits and credits after posting
Equipment, Accounts Payable
Purchased equipment for $2,000 on account
Office supplies, Accounts Payable
Purchased office supplies on account, $900
Cash, Service Revenue
Received $2,100 cash for consulting with Plummer and Gorden
Utilities Expense, Accounts Payable
Received a bill for $150 for the monthly utilities. The Bill has not yet been paid.
Utilities Expense, Utilities Payable
Received a bill for utilities to be paid next month, $250
Cash Basis
Revenue is recorded when Cash is received; Expenses are recorded when cash is paid; not allowed under GAAP
Accrual Basis
Revenue is recorded when it is earned; expenses are written when incurred; generally used by larger businesses
Revenue Recognition Principle
Revenue should be recorded when it is earned
Cash and Accounts Receivable, Service Revenue
Revenues earned during the month included $6,500 cash and $5,800 on account. Record as a compound entry.
Long-Term Assets
Stocks, Bonds, Other long term Investments are all
Cash, Unearned Revenue
The business received $1,140 for medical screening services to be performed next month
Advertising Expense, Advertising Payable
The business received a bill for advertising in the daily newspaper to be paid in August, $240
Supplies Expense, Office Supplies
The unadjusted balance of the Office Supplies account is $3,500. Office Supplies on hand total $1,700
Debt Ratio
Total Liabilities/Total Assets
Current Ratio
Total current assets/total current liabilities