Financial Accounting Exam 1 - Chapter 1 & 2

Equation for SE

RE + CS

Equation for RE

Revenue - Expenses - Dividends

Revenue, Expenses and Dividends relationship with Stockholder's Equity

Revenue: Increase in Revenue= Increase in SE Expenses and Dividends: Decrease in either= Decrease in SE

What does "on account" mean?

Either Accounts Receivable or Accounts payable

Relationship between SE and Balance Sheet

Ending Retained Earnings from the Balance Sheet is transferred from SE to the Balance Sheet and is used under the Stockholder's Equity

Generally Accepted Accounting Principles (GAAP)

common set of accounting principles, standards and procedures that companies must follow when they compile their financial statements - Issued by FASB

Unadjusted Trial Balance

list of all accounts and their aggregated totals at a particular date; uses account balances

Two functions of accounting are

measuring and communicating

Financial Accounting Standards Board (FASB)

private, non-profit organization market regulator whose primary purpose is to establish and improve generally accepted accounting principles (GAAP) within the United States

Name the Financial Statement, Normal Balance, and Category of the following 1. Common Stock 2. Prepaid Expenses 3. Accounts Payable 4. Notes Payable 5. Cash 6. Retained Earnings 7. Unearned Revenue 8. Accounts Receivable 9. Accumulated Depreciation

1. Balance Sheet, Credit, Stockholder's Equity 2. Balance Sheet, Debit, Asset 3. Balance Sheet, Credit, Liability 4. Balance Sheet, Credit, Liability 5. Balance Sheet, Debit, Asset 6. Balance Sheet, Credit, Stockholders Equity 7. Balance Sheet, Credit, Liability 8. Balance Sheet, Debit, Asset 9. Balance Sheet, Credit, Asset

Define the debit and credit effects on the accounting equation in regards to... 1. Common Stock 2. Retained Earnings 3. Revenue 4. Expenses 5. Dividends 6. Stockholders Equity 7. Assets 8. Liabilities

1. Decrease with debit, Increase with credit 2. Decrease with debit, Increase with credit 3. Decrease with debit, Increase with credit 4. Increase with debit, decrease with credit 5. Increase with debit, decrease with credit 6. Decrease with debit, Increase with credit 7. Increase with debit, decrease with credit 8. Decrease with debit, increase with credit

Name the Financial Statement and Normal Balance of the following 1. Depreciation Expense 2. Expenses 3. Revenue 4. Liability 5. Dividends

1. Income statement, Debit 2. Income statement, Debit 3. Income Statement, Credit 4. Balance Sheet, Credit 5. Stockholder's Equity, Debit

How to record a Journal entry

1. Record debit along with $ value 2. Record credits with indent and $ value 3. Provide a description of the transaction

What is included in the right side of a T-account?

Credits: - Stockholder's equity, revenue, liabilities

3 aspects of Cash Flow

Operating Financing Investing

Cash Flow- Investing

Cash transactions for the purchase of long-term assets and investments; assets that provide benefits for longer than 1 year ex: equipment, land, plant assets

What is included on the left side of a T-account?

Debits: - Dividends, Expenses, Assets

Cash Flow- Financing

Includes transactions the company has with investors and creditors ex: issuing stock, borrowing money from bank (notes payable)

Cash Flow- Operating

Involves transactions that relate to the primary operations of the company; providing products and services to customers ex: rent, salaries, utilities, taxes, advertising

Relationship between Income Statement and Statement of Stockholder's Equity?

Net Income from the Income Statement in transferred to SE and is used to calculate Retained Earnings - (Beg balance + Net Income - Dividends)

Relationship between Balance Sheet and Statement of Cash Flow

The statement of cash flows reconciles changes in the cash account from the beginning to the ending balance sheet