ACCY 200 Recharge of first half of LearnSmarts

liability accounts are ____ with debits

decreased

what are all of the subtotals on the income statement

gross profit, income from operations, and income before taxes

frequently called earnings from operations or operating income

income from operations

accounts receivable

represents amounts due from customers who have purchased merchandise on credit

would sales account be closed during the year-end closing process

yes

would service revenue account be closed during the year-end closing process

yes

would wages expense account be closed during the year-end closing process

yes

examples of estimates frequently made in accounting

- warranty costs - depreciation of buildings and equipment -pension expense

expense and loss accounts normally have a ____ balance

debit

losses and dividends are closed in the same way that ____ are closed

expenses

year-end adjustments are made to ensure that ____ are recognized in the year in which they are incurred

expenses

gross profit - selling, general, and administrative expenses

income from operations

year-end adjustments are made to ensure that ____ are recognized in the year in which they are earned

revenues

NSF checks are ____ from the company's book balance

subtracted

result in making both the balance sheet and income statement more accurate

adjusting entries

result in recording expenses in the period during which they were incurred

adjusting entries

result in recording revenues in the period during which they were earned

adjusting entries

assume that a company earned $100 of service revenue from a client, but that only $30 was collected in cash at the time the services were performed. This transaction would be recorded in the horizontal model with: $30 ____ and $70 ____ in the Assets column and +$100 ____ in the Revenues column

cash; accounts receivable; service revenue

all expense and loss accounts, as well as dividends, are credited for amounts equal to their year-end debit balances

closing process

for the closing process, all expense accounts are closed by ____ each account for an amount equal to the adjusted year-end ____ balance

crediting; debit

merchants who send you a notice that they have "charged" your account are really communicating that they have ____ your account in their accounting records to ____ your account balance, which is shown as a(n) ____ from their perspective, since you owe them money

debited; increase; asset

for the closing process, all revenue accounts are closed by ____ each account for an amount equal to the adjusted year-end ____ balance

debiting; credit

subtotal on the income statement not affected by the firm's tax rate or by amount of interest expense incurred

income from operations

which calculations are found on the income statement

income from operations, income before taxes, gross profit, and net income

debits ____ expense and loss accounts

increase

are present obligations to transfer assets or provide services to other organizations

liabilities

in the horizontal model, a minus sign in the expenses column means that net income is ____ as a result of expenses being ____

lower; higher

means that absolute exactness is not necessary in the amounts shown in the financial statements

materiality

would cash account be closed during the year-end closing process

no

would merchandise inventory account be closed during the year-end closing process

no

would notes payable account be closed during the year-end closing process

no

would accounts payable account be closed during the year-end closing process

no; accounts payable is a liability. only income statement accounts and dividends are closed to retained earnings

accrual of a revnue

occurs when a revenue has been earned but not yet received in cash

accrual of an expense

occurs when an expense has been incurred but not yet paid for in cash

retained earnings is ____ by any dividends paid to stockholders

reduced

objectivity

refers to accountants' desire to have a given transaction recorded in the same way in all situations

Assets = Liabilities + Paid-in capital + ____ (beginning of period) + ____ (for period) - ____ (for period)

retained earnings; revenues; expenses

ownership right of the stockholders in the the assets that remain after subtracting the liabilities of the corporation

stockholders' equity

in a bank reconciliation, outstanding checks are ____ from the bank balance

subtracted

transaction analysis question that is a feedback loop to ensure that the entry you recorded is consistent to your understanding of "What's going on?"

"Does my analysis make sense?"

transaction analysis question that is essentially the same question as "Do the debits equal the credits?"

"Does the balance sheet balance"

transaction analysis question that is where you identify the specific accounts affected by the transaction

"What accounts are affected?"

If assets total $15,000 and liabilities total $9,000, then stockholders' equity totals ____

$6,000

the two main components of paid-in capital

- common stock - additional paid-in capital

three activity categories in the statement of cash flows are

- investing activities - operating activities - financing activities

concepts/principles relating to transactions

- objectivity - unit of measurement - cost principle

disadvantages of proprietorships

- owner has limited ability to raise capital - owner has unlimited personal liability - if the business fails, owner's personal assets may be claimed by business creditors

account types reported on the income statement

- revenues - expenses - gains - losses

statement of changes in stockholders' equity reports

- the year-end balance of retained earnings - common stock issued during the year - net income for the year - dividends for the year - total stockholders' equity at the end of the year

abbreviation for credit

Cr

abbreviation for debit

Dr

A = L +SE

accounting equation

in a bank reconciliation, deposits in transit are ____ to the bank's balance

added

in a bank reconciliation, interest earned is ____ to the company's book balance

added

adjusting entries affect both the ____ and the ____

balance sheet; income statement

if debits equal credits, then the company's balance sheet equation will

be in balance

year-end adjustments are made because the cash receipt from the revenue may occur when?

before or after the event that causes revenue recognition

only income statement accounts (revenues, expenses, gains, and losses) and dividends are ____ to retained earnings

closed

most assets are not recorded at their current market values because of the limitations imposed by the ____ principle

cost

liability accounts normally have a ____ balance

credit

Account receivable are recorded for the company's gross ____

credit sales

accounts receivable are reported as ____ on the balance sheet

current assets

when a bank ____ your account for service charges incurred during the month, what they are really communicating is that they are ____ the ____ recorded in their accounting records to represent your account from their perspective

debits; decreasing, liability

debits ____ revenue and gain accounts

decrease

expense and loss accounts are ____ with credits

decreased

cash receipts from customers do not need an ____ because these have exact amounts

estimations

accounts are summarized in ____ whereas transactions are summarized in ____

financial statements; accounts

net sales - cost of goods sold

gross profit

the cost of forming a corporation is usually ____ than that of starting a proprietorship or partnership

higher

The key to using the ____ is to keep the balance sheet in balance

horizontal model

income from operations - interest expense

income before taxes

expense and loss accounts are ____ with debits

increased

liability accounts are ____ with credits

increased

retained earnings is ____ each year by the entity's net income (if positive)

increased

after transactions have been recorded in a journal, they are posted to a ____

ledger

in bookkeeping and accounting, debit means ____, and credit means ____, and nothing more

left; right

are amounts owed to other entities

liabilities

are claims against the firm by its creditors

liabilities

income before income taxes - income taxes

net income

misleading term because assets and liabilities are not generally "worth" the amounts reported on the balance sheet

net worth

would buildings account be closed during the year-end closing process

no

would common stock account be closed during the year-end closing process

no

would dividends payable account be closed during the year-end closing process

no

____ is referred to as an accumulated deficit if cumulative losses and dividends exceed cumulative net income

retained earnings

cumulative net income of the business less any dividends paid to stockholders

retained earnings

cumulative net income of the entity that has been retained for use in the business

retained earnings

in the horizontal model representation of the financial statements, the arrow going from net income to stockholders' equity means that net income affects the ____ account within stockholders' equity

retained earnings

is the second principal category of stockholders' equity

retained earnings

represents the cumulative net income of the entity that has been retained for use in the business

retained earnings

the investments by and distributions to owners during the period are reported on which financial statement

statement of stockholders' equity

although revenues and expenses are reported on the income statement, they also impact ____ on the balance sheet

stockholders' equity

accounting period

the period of time selected for reporting the financial statements

are the starting point in the accounting process that end with the preparation of financial statements

transactions

can be seen as the bricks that build financial statements

transactions

accounts receivable are normally due ____

within a specified period of time

would cost of goods sold account be closed during the year-end closing process

yes

would dividends account be closed during the year-end closing process

yes

would gain on the sale of land account be closed during the year-end closing process

yes

would loss on the sale of buildings be closed during the year-end closing process

yes

would rent expense account be closed during the year-end closing process

yes