Accounting: Chapter 1

On August 25, Gallatin Repair Service extended an offer of $400,000 for land that had been priced for sale at $500,000. On September 3, Gallatin Repair Service accepted the seller's counteroffer of $460,000. On October 20, the land was assessed at a value of $300,000 for property tax purposes. On December 4, a national retail chain offered Gallatin Repair Service $525,000 for the land. At what value should the land be recorded in Gallatin Repair Service's records?

$460,000 Under the cost concept, the land should be recorded at the cost to Gallatin Repair Service

Balance Sheet

A list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or a year.

Statement of cash flows

A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.

Statement of owner's equity

A summary of the changes in owner's equity that have occurred during a specific period of time, such as a month or a year.

Income Statement

A summary of the revenue and expenses for a specific period of time, such as a month or a year.

Accounting Equation

Assets = Liabilities + Owner's Equity

The revenues and expenses of Chickadee Travel Service for the year ended April 30, 2019, follow: Fees Earned ---- $263,200 Miscellaneous expense ---- $12,950 Office expense ----- $63,000 Wages expense ---- $131,700

Chickadee Travel Service Income Statement For the Year Ended April 30, 2019 Fees Earned..................... $263,200 Expenses: Wages expense....... $131,700 Office expense....... $63,000 Misc. expense....... $12,950 Total expenses...... $207,650 Net Income........................... $55,550

What is a statement of cash flows? & list its three sections

Operating activities Investing activities Financing activities

John Joos is the owner and operator of You're A Star, a motivational consulting business. At the end of its accounting period, December 31, 2018, You're A Star has assets of $800,000 and liabilities of $350,000. Using the accounting equation... a. Owner's equity as of December 31, 2018 b. Owner's equity as of December 31, 2019, assuming that assets increased by $130,000 and liabilities decreased by $25,000 during 2019.

a. $450,000 $800,000 = $350,000 + Owner's Equity b. $605,000 (change in owner's equity). $155,000 (Owner's equity)

The liability created by a purchase on account

account payable

A claim against the customer

accounts receivable (asset)

The resources owned by a business are its

assets

Revenue from providing services is recorded as

fees earned

After transactions have been recorded and summarized, reports are prepared for users. The accounting reports providing this information are called

financial statements

The rights of creditors are the debts of the business and are called

liabilities

The excess of the revenue over the expenses is called

net income, net profit, or earnings

The rights of the owners are called

owners equity

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

prepaid expenses (asset)

If expenses exceed revenue

the excess is a net loss