Accounting Test 1

If equity is $300,000 and liabilities are $192,000, then assets equal:

$492,000 = 192,000+300,000

Statement of cash flows

A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged by operating, investing, and financing.

Statement of ret. earnings set up

Add: net income, Less: dividends.

Adjusting entries:

Affect both income statement and balance sheet accounts

The accounting process begins with:

Analysis of business transactions and source documents.

If a company receives $12,000 from a stockholder, the effect on the accounting equation would be:

Assets increase $12,000 and equity increases $12,000

The income statement reports all of the following except:

Assets owned by a business (balance sheet)

balance sheet set up

Assets | liabilities + equity.

Liabilities

Creditor's claims on assets.

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Debit office supplies expense $254 and credit office supplies $254

Unearned revenues are generally:

Liabilities created when a customer pays in advance for products or services before the revenue is earned.

The accounting principle that requires accounting info to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

Measurement (cost) principle

When expenses exceed revenues, the result is called:

Net loss

Monetary Unit Principle

Principle that assumes transactions and events can be expressed in money units.

Business entity principle

Principle that requires a business to be accounted for separately from its owners.

The statement of retained earnings:

Reports changes in equity due to net income, net losses and dividends.

Expense Recognition Principle

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses.

Revenue Recognition Principle

The principle that revenue is recorded when earned through providing goods or services.

Accounting equation

The relation between a company's assets, liabilities, and equity.

plant assets

a tangible long term asset.

A trial balance prepared after adjustments have been recorded is called an:

adjusted trial balance

Prepaid accounts (also called prepaid expenses) are generally:

assets that represent PREPAYMENTS of future expenses.

The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as:

business entity assumption

The right side of a T-account is a:

credit

GreenLawn co. provides landscaping services to clients. On May 1, a customer paid GreenLawn $60,000 for 6-months services in advance. GreenLawn's general journal entry to record this transaction will include a:

credit to unearned revenue for $60,000

Income statement

describes a company's revenues and expenses along with the resulting net income or loss over a period of time.

Income Statement set up

expenses, net income.

Events

happenings, such as changes in market value, that effect the accounting equation and are reliably measured.

Financial statements are typically prepared in the following order:

income statement, statement of retained earnings, balance sheet.

Which of the following assets is not depreciated?

land

The primary objective of financial accounting is to:

provide accounting info that serves external users.

Balance sheet

reports on amounts for assets, liabilities, and equity at a point in time.

If Houston Company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and:

revenue increases $10,000

Expenses

the cost of assets or services used to earn revenue.

Cash basis accounting

the system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid.

The account that is classified as a liability in a company's chart of accounts:

unearned revenue

Which of the following is NOT an equity account?

unearned revenue

A credit is used to record an increase in all of the following accounts except:

wages expense

The account that normally has a credit balance:

wages payable