Accounting 1001

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What qualifies as a current liability?

- Accounts payable - Accrued expenses payable - Unearned revenue (gift cards) - Notes payable - Capital lease obligations

What qualifies as a non-current liability?

- Notes payable when the obligation is due beyond the next 12 months

What qualifies as a non-current asset?

- PP&E - Intangible assets (trademarks, patents, goodwill, etc...) - Long-term investments

What qualifies as a current asset?

- cash and cash equivalents - short-term or long-term marketable securities - Accounts receivable - Notes receivable - Inventory (merchandise, supplies, etc...) - prepaid expenses

Purchased a machine for $32,000 on January 1, 2011. The company estimates annual depreciation at $3,200

1/1/2011 PP&E(+A) $32,000 Cash(-A) $32,000 Passive entries on 12/31/2015 Depreciation Expense(+E,-SE) $3,200 PP&E(-A) $3,200

collected $1,200 rent for the period from December 1, 2015 to April 1, 2016, which was credited to Unearned Rent Revenue on December 1, 2015

12/1/2015 Cash(+A) $1,200 Unearned Rent Revenue(+L) $1,200 Passive entries on 12/31/2015 Unearned Rent Revenue(-L) $300 Rent Revenue(+R,+SE) $300

Paid $5,000 for two year insurance premium on July 1, 2015; debited prepaid insurance for that amount

7/1/2015 Prepaid insurance(+A) $5,000 Cash(-A) $5,000 Passive entries on 12/31/2015 insurance expense(+E, -SE) $1,250 prepaid insurance(-A) $1,250

On 9/1/2015, loaned $6,000 to an officer who will repay the loan principle and interest in one year at an annual rate of 14%

9/1/2015 ST notes receivable(+A) cash(-A) passive entries on 12/31/2015 Interest Receivable (+A) Interest revenue(+R,+SE) 9/1/2016 Cash(+A)-------6,000+(6,000*.14) ST notes receivable (-A)--------6,000 Interest receivable(-A)---------280 Interest Revenue(+R,+SE)------560

paid $32,074 cash on accounts payable

Accounts payable(-L) Cash(-A)

Form 10-k

Annual report filed by public companies with the SEX that contains additional detailed financial information

Provided $39,323 in service to customers during the year, with $28,558 on account and the rest received in cash

Cash (+A) Accounts receivable(+A) Service Revenue(+R, +SE)

Issued 100 shares of stock worth $2 each for $345 cash

Cash(+A) Common Stock(+SE) Additional P.I.C.(+SE)

Sold $4,313 in ST investments for cash

Cash(+A) ST investments(-A)

Received $39,043 on account paid by customers

Cash(+A) Accounts receivable(-A)

Borrowed $181 from a bank, signing a short-term note

Cash(+A) ST notes payable (+L)

Borrowed $50,000 from the local bank on a 10%, one-year note

Cash(+A) ST notes payable (+L)

Current Ratio

Current Assets ÷ Current Liabilities

Current liabilities

Debts payable within the next 12 months

How is retained earnings affected by Dividends?

Decreases in RE due to payments back to shareholders

How is retained earnings affected by Expenses?

Decreases in RE from operations

Depreciation for the year on equipment, $10,000

Depreciation expense(+E,-SE) Accumulated depreciation(+XA,-A)

Purchased and used fuel of $750 in delivery vehicles during the year (paid for in cash)

Fuel expenses(+E,-SE) Cash(-A)

Gross Profit Percentage (or margin)

Gross Profit ÷ Net Sales

How is retained earnings affected by Revenues?

Increases in RE from delivering goods

Purchased $32,305 inventory on account

Inventory(+A) Accounts payable(+L)

Return on Assets (ROA)

Net Income ÷ Average Total Assets

Net Profit Margin

Net Income ÷ Net Sales

Earnings per share

Net income ÷ Average number of common shares

purchases $442 worth of equipment. Paid $432 in cash and signed long-term note for the rest

PP&E(+A) Cash(-A) LT Notes Payable(+L)

purchased plant and equipment for $636

PP&E(+A) Cash(-A)

Revenue Realization Principle

Principle in accounting that states that revenue will not be recognized unless four condiments are present: 1) Goods or services are delivered 2) There is evidence of an arrangement for customer payment 3) Prices are fixed or determinable 4) Collection is reasonably assured

Form 10-Q

Quarterly report filed by public companies with the SEC that contains additional unaudited financial information

Annual report

Report containing the four basic statements for the year, related notes, and often statements by management and auditors

Form 8-k

Report of special events (such as auditor changes, mergers, etc...) filed by public companies with the SEC

Declared $145 in dividends to be paid in the following year

Retained earnings(-SE) Dividends payable(+L)

Declared and paid $597 in dividends for the year

Retained earnings(-SE) Cash(-A)

Purchased additional ST investments for $7,616

ST investment(+A) Cash(-A)

Paid payroll, $3,500 during the year

Salary expenses(+E,-SE) Cash(-A)

Total Asset Turnover

Sales (or operating) Revenues ÷ Average Total Assets

Treasury stocks

Shares that have been repurchased by the company; reduces total stockholders' equity

Retained earnings

The accumulated amount of past earnings of a corporation that has not been distributed to shareholders as dividends. RE= cumulative reinvested profits

Incurred $68 in utility usage during the year; paid $55 in cash and owed the rest on account

Utility expense(+E,-SE) Cash(-A) Accounts payable(+L)

wages earned by employees since the December 24 payroll but not yet paid, $16,000

Wage expense(+E,-SE) Wages payable(+L)

Current assets

assets which the company expects to convert to cash, sell, or consume within the next 12 months

Long term (non-current) assets

assets which the company expects to hold longer than 12 months

financing activities

borrowing and repaying debt, including short-term bank loans, issuing and repurchasing stock, and paying dividends

Quarterly report

brief unaudited report for the quarter normally containing summary income statement and balance sheet

Investing activities

buying and selling non-current assets and investments

Non-current liabilities

debts due beyond the next 12 months

The effect of recording an adjustment of not yet paid wages of $2,000

decrease in stockholders' equity and an increase in liabilities

Total asset turnover ratio

helps us determine how efficient management is in using assets to generate sales

Income tax expense, $11,000 payable in 2016

income tax expenses(+E,-SE) income tax payable(+L)

several Nike investors sold their own stock

nothing happens

Estimated electricity usage at $450 for December; to be paid in January 2016

passive entries on 12/31/2015 utilities expense (+E,-SE) utilities payable (+L)

Operating activities

primarily with customers and suppliers, and interest payments and earnings on investments

Stockholders' equity

stockholders' ownership of the assets of the business; consists of the following categories: - Contributed capital - Retained earnings - Treasury stock - Accumulated other comprehensive income (loss)

Contributed capital

the amount invested in the company by the owners. - Common stock (par value) - Additional paid-in-capital

Press release

written public new announcement that is normally distributed by major news services


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