AGB 214 Ch: 1, 2, 3, and 4 + Practice tests (Midterm 1)

If operations for an accounting period resulted in fees on account of $66,000 and fees for cash of $34,000, the amount of revenue for the period was

$100,000

What was the amount of the net income or net loss indicated in Question 20?

$15,000

If total assets increased by $80,500 and stockholders' equity increased by $55,000 during the period, the amount and direction (increase or decrease) of the period's change in total liabilities was

$25,500 increase

If stockholders' equity is $200,000 and liabilities are $66,000, the amount of assets is

$266,000

What was the amount of the net income or net loss indicated in Question 14? ^^ above

$28,000

If assets are $120,000 and liabilities are $55,000, the amount of stockholders' equity is

$65,000

Sharpe offered for sale at $10,000 a machine that had been purchased for $24,000. If Barron paid Sharpe $9,000 for the machine, the amount that Barron would record in the accounting records for the purchase of the machine is

$9,000

Account Receivable

A claim against the customer created by selling merchandise or services on credit.

Matching Concept

A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses.

Notes Receivable

A customer's written promise to pay an amount and possibly interest at an agreed-upon rate.

Natural Business Year

A fiscal year that ends when business activities have reached the lowest point in an annual operating cycle.

Ledger

A group of accounts for a business.

Chart of the accounts

A list of the accounts in the ledger.

Expenses

Assets used up or services consumed in the process of generating revenues.

Current Assets

Cash and other assets that are expected to be converted to cash or sold or used up, usually within one year or less, through the normal operations of the business.

A listing of accounts in the ledger

Chart of Accounts

Normal balance of revenue accounts

Credit

Right side of an account

Credit

Normal balance of expense accounts

Debit

Dividends

Distribution of a corporation's earning to stockholders.

An account of a corporation which represents the distributions of earnings to stockholders

Dividends

Revenue Accounts

Earned Revenue, commissions earned

Assset Accounts

Equipment, Notes receivable, Prepaid insurance, cash

Accrued Expenses

Expenses that have been incurred but not recorded in the accounts.

Horizontal analysis

Financial analysis that compares an item in a current statement with the same item in prior statements.

The process of recording the data in an entry to the proper account

Posting

Accrued Revenues

Revenues that have been earned but not recorded in the accounts.

Closing entries

The entries that transfer the balances of the revenue, expense, and drawing accounts to the owner's capital account.

Journal Entry

The form of recording a transaction in a journal.

Closing Process

The transfer process of converting temporary account balances to zero by transferring the revenue and expense account balances to Income Summary, transferring the income summary account balance to the retained earnings account, and transferring the dividends account to the retained earnings account.

Adjusted Trial Balance

The trial balance prepared after all the adjusting entries have been posted.

depreciate

To lose usefulness as all fixed assets except land do.

The error caused by the rearrangement of digits in a number

Transposition

Proof of the equality of debits and credits of the entire group of accounts of a business

Trial Balance

Term for the entire group of accounts maintained by a business with their balances

Trial Balance

cash basis of accounting

Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which cash is received or paid.

Accrual basis of accounting

Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which they are earned or incurred.

Revenue received in advance

Unearned Revenue

The four most common financial statements for a corporation are:

a. income statement b. balance sheet c. retained earnings statement d. statement of cash flows

The expression "Assets = Liabilities + Owner's Equity" is known as the

accounting equation

Amounts owed to vendors by customers that result from sales on account are referred to as

accounts payable

Economic resources owned by a business are called

assets

The difference between the cost of a fixed asset account and its related accumulated depreciation account is referred to as the fixed asset's

book value

The accounting basis under which revenues are reported in the period in which cash is received and expenses are reported in the period in which cash is paid is called the

cash basis

The process of posting adjusting and closing entries in the ledger at the end of an accounting period is called the

closing process

A business entity in which ownership is divided up into shares is called a(n)

corporation

Stockholders equity accounts

dividends

Rules of accounting and disclosure for financial reporting are

generally accepted accounting principles (GAAP)

Managerial accounting provides information to what kind of users of accounting information?

internal

A business entity that has attributes of a partnership and a corporation is called a(n)

limited liability company

A business that buys products from other businesses and sells them to customers is referred to as a(n)

merchandiser

If operations for an accounting period resulted in cash fees of $95,000, fees on account of $10,000, and expenses paid in cash of $77,000, did the business incur a net income or a net loss for the period?

net income

The excess of revenues over expenses is referred to as

net income

The stockholders' equity at the beginning of the period was $200,000; at the end of the period, assets were $255,000 and liabilities were $40,000. If the owner made no additional investments or paid no dividends during the period, did the business incur a net income or a net loss for the period?

net income

Unadjusted trial balance

A summary listing of the titles and balances of accounts in the ledger prior to the posting of adjusting entries.

Trial Balance

A summary listing of the titles and balances of accounts in the ledger.

Double-entry Accounting System

A system of accounting for recording transactions, based on recording increases and decreases in accounts so that debits equal credits.

Temporary (Nominal) Accounts

Accounts that report amounts for only one period.

Debit

Amount entered on the left side of an account.

Credit

Amount entered on the right side of an account.

Contra Account (Contra asset account)

An account offset against another account.

Income Summary

An account to which the revenue and expense account balances are transferred at the end of a period.

Adjusting Process

An analysis and updating of the accounts when financial statements are prepared.

Correcting journal entry

An entry that is prepared when an error has already been journalized and posted.

Slide

An error in which the entire number is moved one or more spaces to the right or the left, such as writing $542.00 as $54.20 or $5,420.00.

transposition

An error in which the order of the digits is changed, such as writing $542 as $452 or $524.

Clearing Account

Another name for the income summary account because it has the effect of clearing the revenue and expense accounts of their balances.

Rules of Debit and Credit

In the double-entry accounting system, specific rules for recording debits and credits based on the type of account.

Revenue

Increase in owner's equity as a result of selling services or products to customers.

Prepaid expenses

Items such as supplies that will be used in the business in the future.

Long-term liabilities

Liabilities that usually will not be due for more than one year.

Current Liabilities

Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets.

Fixed Assets (Plant assets)

Long-term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.

Book value of the asset

The difference between the cost of a fixed asset and its accumulated depreciation.

Real (Permanent) Accounts

Term for balance sheet accounts because they are relatively permanent and carried forward from year to year.

Accounting Period Concept

The accounting concept that assumes that the economic life of the business can be divided into time periods.

Revenue recognition concept

The accounting concept that supports reporting revenues when the services are provided to customers.

Balance of the account

The amount of the difference between the debits and the credits that have been entered into an account.

Fiscal Year

The annual accounting period adopted by a business.

Accumulated Depreciation

The contra asset account credited when recording the depreciation of a fixed asset.

Journal

The initial record in which the effects of a transaction are recorded.

Adjusting Entries

The journal entries that bring the accounts up to date at the end of the accounting period.

unearned revenue

The liability created by receiving revenue in advance.

Normal balance of an account

The normal balance of an account can be either a debit or a credit depending on whether increases in the account are recorded as debits or credits.

Stockholders equity

The owners' equity in a corporation.

depreciation expense

The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.

Journalizing

The process of recording a transaction in the journal.

Closing the books

The process of transferring temporary accounts balances to permanent accounts at the end of the accounting period.

Posting

The process of transferring the debits and credits from the journal entries to the accounts.

Accounting Cycle

The process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance.

Assets

The resources owned by a business.

liabilities

The rights of creditors that represent debts of the business.

T account

The simplest form of an account.

A business owned by one individual is called a(n)

proprietorship

A statement that reports net income or net loss and dividends paid to stockholders for a period of time is a(n)

retained earnings statement

A report of changes in cash during a period of time is a(n)

statement of cash flows

Expense Accounts

supplies expense, wages expense

An economic event that must be recorded is a(n)

transaction

Liability accounts

unearned revenue