Accounting Test #1

Current Liabilities

A/P, Interest Payable, Notes Payable, Utilities Payable, Salaries Payable, and Unearned Revenue are all

Fiscal Year

Any twelve month period

Time Period Concept

Assumes that a business's activities can be sliced into segments and that financial statements can be prepared for specific time periods, such as month, quarter, or year

Unearned Revenue, Rent Revenue

August 1, a business collected $3,300 rent in advance, debiting Cash and crediting Unearned Revenue. the tenant was paying one year's rent in advance. At December 31, the business must account for the amount of rent it has earned

Cash, Notes Payable

Borrowed $23,000 from the bank for business use

Current Assets

Cash, A/R, Office Supplies, Prepaid accounts are all

Retained Earnings, Dividends

Close the Dividends accounts

Income Summary, Retained Earnings

Close the Income Summary

Service Revenue, Income Summary

Close the Service Revenue account

Income Summary, Expense accounts

Close the expense accounts

Accounts Receivable, Service Revenue

College Park billed customers, $6,000, for welding services performed.

Unearned Revenue, Service Revenue

College Park had earned $3,200 of unearned revenue.

Interest Expense, Interest Payable

College Park had incurred (but not recorded) $150 of interest expense on a note payable. The interest will not be paid until February 28.

Chart of Accounts

Companies typically maintain a listing of all of the accounts that they use in their accounting system, often numbered and grouped by account type

Intangible

Copyright, patent

Financial Accounting Standards Board

Creates the rules and standards that govern financial accounting

Liabilities, Revenues, and Common Stock

Credits go up in these accounts

Assets, Expenses, and Dividends

Debits go up in these accounts

Salaries Expense, Salaries Payable

Each Monday, College Park pays employees for the previous week's work. The amount of weekly payroll is $5,600 for a seven-day workweek (M-Sun). This year December 31 falls on Thursday.

Depreciation Expense, Accumulated Depreciation

Equipment depreciation was $300

Matching Principle

Expenses are recorded when they are incurred during the period; Expenses are matched at the end of the period against the revenues for that period

Financial Accounting

External Decision Makers

Plant Assets

Furniture, Buildings, Land, Accumulated Depreciation, Equipment, Vehicles, are all

Accounting

Information system that measures business activities, processes the information into reports, and communicates the results to decision makers.

Managerial Accounting

Internal Decision Makers

Cash, Common Stock

Investors contributed $8,000 to the corporation in exchange for common stock

Generally Accepted Accounting Principles

Issued by the FASB, establishes the rules for recording transactions and preparing financial statements

Long-Term Liability

Notes Payable is a

Insurance Expense, Prepaid Insurance

On March 1, when the business prepaid $600 for a two-year insurance policy, the business debited Prepaid Insurance and credited Cash.

Accounts Receivable, Service Revenue

On October 1, Arlington agreed to provide a four-month air system check (beginning October 1) for a customer for $3,200. Arlington completed the system check every month but payment has not yet been received and no entries have been made.

Securities and Exchange Commission

Oversees the US financial markets

Prepaid Insurance, Cash

Paid $1,200 cash for a 12-month insurance policy starting on October 1

Wages Expense, Cash

Paid $200 for wages to employees

Office Supplies, Cash

Paid $300 for office supplies

Rent Expense, Cash

Paid $800 for rent

Salaries Expense, Cash

Paid assistant's semimonthly salary, $1,490

Dividends, Cash

Paid cash dividends of $6,700

Accounts Payable, Cash

Paid for the furniture purchased on September 4 on account

Rent Expense, Cash

Paid monthly rent on medical equipment

Cash and Office Furniture, Common Stock

Parker opened an accounting firm by contributing $14,000 cash and office furniture with a fair market value of $5,200 in exchange for common stock. Prepare a compound entry.

Accounts Receivable, Service Revenue

Performed services for a hotel and received its promise to pay the $1,000 within one week

Trial Balance

Primary purpose is to prove the mathematical equality of debits and credits after posting

Equipment, Accounts Payable

Purchased equipment for $2,000 on account

Office supplies, Accounts Payable

Purchased office supplies on account, $900

Cash, Service Revenue

Received $2,100 cash for consulting with Plummer and Gorden

Utilities Expense, Accounts Payable

Received a bill for $150 for the monthly utilities. The Bill has not yet been paid.

Utilities Expense, Utilities Payable

Received a bill for utilities to be paid next month, $250

Cash Basis

Revenue is recorded when Cash is received; Expenses are recorded when cash is paid; not allowed under GAAP

Accrual Basis

Revenue is recorded when it is earned; expenses are written when incurred; generally used by larger businesses

Revenue Recognition Principle

Revenue should be recorded when it is earned

Cash and Accounts Receivable, Service Revenue

Revenues earned during the month included $6,500 cash and $5,800 on account. Record as a compound entry.

Long-Term Assets

Stocks, Bonds, Other long term Investments are all

Cash, Unearned Revenue

The business received $1,140 for medical screening services to be performed next month

Advertising Expense, Advertising Payable

The business received a bill for advertising in the daily newspaper to be paid in August, $240

Supplies Expense, Office Supplies

The unadjusted balance of the Office Supplies account is $3,500. Office Supplies on hand total $1,700

Debt Ratio

Total Liabilities/Total Assets

Current Ratio

Total current assets/total current liabilities