Accounting chapter 1-2
False
All of the steps in the accounting cycle are performed only at the end of the accounting period performed only at the end of the accounting period
Manufacturing companies
Buy raw materials, convert them into products, and then sell those products to other companies or to final consumers, such as General Motors, Dupont products.
Service Companies
Perform services for a fee, such as, doctors, lawyers and CPAs.
Merchandising Companies
Purchase goods that are ready for sale and then sell them to customers, such as retail and supermarkets
Statement of Cash Flows
Shows the cash inflows and cash outflows from operating, investing, and financing activities.
Balance sheets
Statement of financial position, list's the company's assets, liabilities, and stockholders equity as of a specific moment in time.
True
The balance sheet contains the same major headings as appear in the accounting equation
Statement of retained earnings and balance sheet
The ending balance in retained earnings is shown in the
False
The income statement shows the possibility of the company and is dated as of a particular day, such as December 31, 2012
True
The statement of retained earnings shows both the net income for the period in the beginning and ending balances of retained earnings
False
The three forms of business organizations are single proprietorship, partnership, and trust
True
The three types of business activity are service, merchandising, and manufacturing
Assets
Things of value owned by the business. To their owners, assets possess service potential or utility that can be measured and expressed in money terms.
Both accounts receivable and retain earnings increase
When services are performed on account, which is the fact
Both assets and stockholders equity increase
When the stockholders invest cash in the business what is the effect
Assets plus stockholders equity equals liabilities
Which of the following is not a correct form of the accounting equation
Inflation accounting concept
Which of the following is not one of the five underlining assumptions or concepts mentioned in the chapter
journal
a chronolgical record of business transactions; the simplest form of journal is the two-column general journal.
trial balance
a listing of the ledger accounts and their debit or credit balances to determine that debits equal credits in the recording process.
Account cycle
a series of steps performed during the accounting period to analyze, record, classify, summarize, and report useful financial information for the purpose of preparing financial statements.
Profitability
ability to generate income, the income statement reflects a company's profitability
Retained Earnings
accumulated net income less dividend distributions to stockholders.
Net Income
amount by which the revenues of a period exceed the expenses of the same period.
accounts receiveable
amounts due from customers for services already provided
Notes payable
amounts owed to parties who loan the company money after the owner signs a written agreement for the company to repay each loan.
accounts payable
amounts owed to suppliers for goods or services purchased on credit
t accounts
an account resembling the letter T, which is used for illustrative purposes only. Debits are entered on the left side of the account, and credits are entered on the right side of the account
Accounting Equation
assets- Equities; or Liabilities + stockholder's equity.
Equities
broadly speaking, all claims to, or interests in, includes liabilities and stockholders equity.
Transaction
business activity or event that causes a measurable change in the items in the accounting equation.
Liabilities
debts owed by a business or creditors equity. Examples; notes payable, accounts payable.
Income Statement
financial statement that shows the revenues and expenses and reports the profitability of a business organization for a stated period of time. Sometimes called an earnings statement.
Revenue
inflows of assets resulting from the sale of products or the rendering of services to customers
Corporation
is a business incorporated under the laws of a state and owned term-11 by a few stockholders or by thousands of stockholders
Single Proprietorship
is an unincorporated business owned by an individual and often managed by that same person
Partnerships
is an unincorporated business owned by two or more persons associated as partners.
accrual basis of accounting
recognizes revenues when sales are made or services are performed regardless of when cash is received. Recognizes expenses as incurred, whiter or not cash has been paid out.
posting
recording in the ledger accounts the information contained in the journal
journal entry
shows all of the effects of a business transaction as expressed in debit and credit and may include an explanation of the transaction
journalizing
step in the accounting recording process that consists of entering the effects of a transaction in a journal
debit balance
the balance in an account when the sum of the debits to the account exceeds the sum of the credits to that account.
ledger
the complete collection of all of the accounts of a company; often referred to as the general ledger
chart of accounts
the complete listing of account titles and account numbers of all the accounts in the ledger; somewhat comparable to a table of contents.
debit
the left side of any account; when used as a verb, to enter a dollar amount on the left side of an account; debits increase asset, expense, and dividends accounts and decrease liability, stockholders equity, and revenue accounts.
Stockholder's Equity
the owners interest in a corporation.
credit
the right side of any account; when used as a verb, to enter a dollar amount on the right side of an account, credits increase liability, stockholders equity, and revenue accounts and decrease asset, expense, and dividends accounts.
Capital Stock
the title given to an equity account showing the investment in a business corporation by its stockholders.