Accounting final

Expenses incurred but not yet paid in cash or recorded

Accrued expenses

companies expense the same amount of depreciation for each year of the asset's useful life

straight line method

adjusting entry for prepaid expenses

Dr. Expenses Cr. Assets or Contra Assets

adjusting entry for accrued expenses

Dr. Expenses Cr. Liabilities

adjusting entry for unearned revenue

Dr. Liabilities Cr. Revenues

decreases in owner's equity that result from operating the business

Expenses

uses accounting, auditing, and investigative skills to conduct investigations into theft and fraud

Forensic accounting

When companies record payments of expenses that will benefit more than one accounting period, they record an asset called

prepaid expenses

When companies receive cash before services are performed, they record a liability by increasing (crediting) a liability account called

unearned revenues

In what deprecation method is useful life is expressed in terms of the total units of production or use expected from the asset, rather than as a time period

units of activity method

Principles for designing an effective accounting information system

(1) cost-effectiveness, (2) usefulness, and (3) flexibility

Expanded accounting equation

Assets = Liabilities + Owner's Capital − Owner's Drawings + Revenues − Expenses

costs that expire either with the passage of time (e.g., rent and insurance) or through use (e.g., supplies)

Prepaid expenses

Expenses paid in cash before they are used or consumed

Prepaid expenses (prepayments)

Increase in asset or decrease of liabilities resulting from the sale of goods or the performance of services in the normal course of business

Revenue

Increases in owner's equity resulting form business activities

Revenue

Revenues for services performed but not yet received in cash or recorded.

Revenues for services performed but not yet received in cash or recorded.

Basic Accounting Equation

assets = liabilities + owner's equity

A liability recorded for cash received before services are performed

A liability recorded for cash received before services are performed

In what depreciation method does it produces a decreasing annual depreciation expense over the asset's useful life

Declining balance

adjusting entry for accrued revenue

Dr. Assets Cr. Revenues

A trial balance: a. is a list of accounts with their balances at a given time. b. proves the journalized transactions are correct. c. will not balance if a correct journal entry is posted twice. d. proves that all transactions have been recorded.

a. A trial balance is a list of accounts with their balances at a given time. The other choices are incorrect because (b) the trial balance does not prove that journalized transactions are mathematically correct; (c) if a journal entry is posted twice, the trial balance will still balance; and (d) the trial balance does not prove that all transactions have been recorded.

Services performed by a public accountant include:a. auditing, taxation, and management consulting.b. auditing, budgeting, and management consulting.c. auditing, budgeting, and cost accounting.d. auditing, budgeting, and management consulting.

a. Auditing, taxation, and management consulting are all services performed by public accountants. The other choices are incorrect because public accountants do not perform budgeting or cost accounting.

The trial balance of Jeong Company had accounts with the following normal balances: Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Owner's Capital $42,000, Owner's Drawings $15,000, and Equipment $61,000. In preparing a trial balance, the total in the debit column is: a. $131,000. b. $216,000. c. $91,000. d. $116,000.

a. The total debit column = $5,000 (Cash) + $40,000 (Salaries and Wages Expense) + $10,000 (Rent Expense) + $15,000 (Owner's Drawings) + $61,000 (Equipment) = $131,000. The normal balance for Assets, Expenses, and Owner's Drawings is a debit. The other choices are incorrect because (b) revenue of $85,000 should not be included in the total of $216,000 and its normal balance is a credit; (c) the total of $91,000 is missing the Salaries and Wages Expense of $40,000, which has a normal balance of a debit; and (d) the total of $116,000 is missing the Owner's Drawings of $15,000, which has a normal balance of a debit.

As of December 31, 2020, Kent Company has assets of $3,500 and owner's equity of $2,000. What are the liabilities for Kent Company as of December 31, 2020?a. $1,500.b. $1,000.c. $2,500.d. $2,000.

a. Using a variation of the basic accounting equation, Assets − Owner's equity = Liabilities, $3,500 − $2,000 = $ 1,500. Therefore, choices (b) $1,000, (c) $2,500, and (d) $2,000 are incorrect.

Which of the following is not part of the recording process? a. Analyzing transactions. b. Preparing an income statement. c. Entering transactions in a journal. d. Posting transactions.

b. Preparing an income statement is not part of the recording process. Choices (a) analyzing transactions, (c) entering transactions in a journal, and (d) posting journal entries are all part of the recording process

Performing services on account will have the following effects on the components of the basic accounting equation: a. increase assets and decrease owner's equity b. increase assets and increase owner's equity c. increase assets and increase liabilities. d. increase liabilities and increase owner's equity.

b. When services are performed on account, assets are increased and owner's equity is increased. The other choices are incorrect because when services are performed on account (a) owner's equity is increased, not decreased; (c) liabilities are not affected; and (d) owner's equity is increased and liabilities are not affected.

A trial balance will not balance if: a. a correct journal entry is posted twice. b. the purchase of supplies on account is debited to Supplies and credited to Cash. c. a $100 cash drawing by the owner is debited to Owner's Drawings for $1,000 and credited to Cash for $100. d. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.

c. The trial balance will not balance in this case because the debit of $1,000 to Owner's Drawings is not equal to the credit of $100 to Cash. The other choices are incorrect because (a) if a correct journal entry is posted twice, the trial balance will still balance; (b) if the purchase of supplies on account is debited to Supplies and credited to Cash, Cash and Accounts Payable will be understated but the trial balance will still balance; and (d) since the debit and credit amounts are the same, the trial balance will still balance but both Accounts Payable and Cash will be overstated.

The expanded accounting equation is: a. Assets + Liabilities = Owner's Capital + Owner's Drawings + Revenues + Expenses. b. Assets = Liabilities + Owner's Capital + Owner's Drawings + Revenues−Expenses. c. Assets = Liabilities − Owner's Capital − Owner's Drawings − Revenues − Expenses. d. Assets = Liabilities + Owner's Capital − Owner's Drawings + Revenues − Expenses

d. The expanded accounting equation is Assets = Liabilities + Owner's Capital − Owner's Drawings + Revenue − Expenses. The other choices are incorrect because (a) both Owner's Drawings and Expenses must be subtracted, not added, and Liabilities should be added to the right side of equation, not to the left side; (b) Owner's Drawings must be subtracted, not added; and (c) Owner's Capital and Revenues must be added, not subtracted.

cost of the asset less its salvage value

depreciable cost

summarizes the changes in owner's equity for a specific period of time.

owner's equity statement

The characteristics of accounting information

relevant, reliable, comparable, consistent