Accounting Knowledge Check Review
If total liabilities decreased by $50600 and stockholders' equity increased by $30800 during a period of time, then total assets must change by what amount and direction during that same period?
$19800 decrease
Retained Earnings Formula
+ Beginning retained earnings + Net income during the period - Dividends paid = Ending retained earnings
The historical cost principle requires that when assets are acquired, they be recorded at
Cost
The private sector organization involved in developing accounting principles is the
Financial Accounting Standards Board
GAAP
Generally Accepted Accounting Principles
The procedure of transferring journal entries to the ledger accounts is called
Posting
Unearned revenue is classified as
a liability account
If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales
allowance
retained earnings
beginning retained earnings + net income - dividends
Accrual Basis Accounting
reporting income when it is earned and expenses when they are incurred
The normal balance of any account is the
side that increases that account
The revenue recognition principle dictates that revenue should be recognized in the accounting records
when services are performed
The expense recognition principle matches
expenses with revenues
The income summary account
is a temporary account
Revenues would not result from
issuance of common stock
The Sales Returns and Allowances account is classified as a(n)
contra revenue account