ACCN
For 2017, Spanos Corporation reported net income $26,000, net sales $400,000, and weighted-average shares outstanding 4,000. There were preferred dividends of $2,000. What was the 2017 earnings per share?
$6 because, earnings per share= net income - preferred dividends / by average shares outstanding
Coronado industries started the year with total assets of 318,000 and total liabilities of 258000. During the year the business recorder 631000 in revenues, and 334000 in expenses, and dividends of 61000. Stockholders equity at the end of the year was?
(assets- liabilities) + (revenues- expenses) - dividends= 296,000
partnership
A business in which two or more persons combine their assets and skills, better tax w high liability
Sole Proprietorship
A business owned by one person, simple and gives you complete control and complete liability but good taxation e
Statement of Cash Flows
A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.
Income Statement
A financial statement that reports a company's revenues and expenses and resulting net income or net loss for a specific period of time.
Balance Sheet
A financial statement that reports assets, liabilities, and owner's equity on a specific date.
Retained Earnings Statement
A financial statement that summarizes the amounts and causes of changes in retained earnings for a specific time period.
General Ledger
A ledger that contains all asset, liability, stockholders' equity, revenue, and expense accounts.
Post-closing trial balance
A list of permanent accounts and their balances after a company has journalized and posted closing entries.
debt to assets ratio
A measure of solvency calculated as total liabilities divided by total assets. It measures the percentage of total financing provided by creditors.
Worksheet
A multiple-column form that companies may use in the adjustment process and in preparing financial statements
Annual Report
A report prepared by corporate management that presents financial information including financial statements, a management discussion and analysis section, notes, and an independent auditor's report.
Generally Accepted Accounting Principles (GAAP)
A set of accounting standards that have substantial authoritative support, that guide accounting professionals.
Double-entry system
A system that records the two-sided effect of each transaction in appropriate accounts.
Cash Basis Accounting
Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.
International Financial Reporting Standards (IFRS)
Accounting standards, issued by the IASB, that have been adopted by many countries outside of the United States.
Which statement about an account is true?
An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders equity items
International Accounting Standards Board (IASB)
An accounting standard-setting body that issues standards adopted by many countries outside of the United States.
Economic Entity Assumption
An assumption that every economic entity can be separately identified and accounted for.
Monetary Unit Assumption
An assumption that requires that only those things that can be expressed in money are included in the accounting records.
Periodicity Assumption
An assumption that the economic life of a business can be divided into artificial time periods.
account
An individual accounting record of increases and decreases in specific asset, liability, stockholders' equity, revenue or expense items.
Basic Accounting Equation
Assets = Liabilities + Stockholders' Equity
current assets
Assets that companies expect to convert to cash or use up within one year or the operating cycle, whichever is longer.
Which accounts normally have debit balances?
Assets, dividends, and expenses
Which financial statement reports assets, liabilities, and stock holders equity?
Balance sheet
Corporation
Business that is a separate legal entity and owned by stockholders. Higher tax w/less liability and easier to raise funds
The correct order of presentation in a classified balance sheet for the following current assets is:
Cash, Accounts receivable, inventory, prepaid insurance
Which one of these statements about the accrual basis of accounting is false?
Companies record revenue only when they receive cash and record expense only when they pay out cash
In a classified balance sheet, assets are usually classified as:
Current assets, long-term investments, property plant, and equipment; and intangible assets
What decreases liabilities and increases assets?
Debits
Paying an account payable with cash affects the components of the accounting equation in the following way:
Decreases assets and liabilities
What does not appear on the income statement?
Dividends!
Closing entries
Entries at the end of an accoutning
Adjusting entries
Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.
What are some events recorded in the accounting record?
Equipment purchased on account, a cash investment made into the business, paying dividends to stock holders, NOT terminating or hiring an employee
Which principle dictates that expenses be recorded with revenues
Expense recognition principle
U.S. standards are developed by the
FASB
During 2017, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity
Increased 40,000
quality of earnings
Indicates the level of full and trans-parent information that a company provides to users of its financial statements
External Users
Investors, creditors, taxing authorities, customers, labor unions, Regulatory agencies
Internal Users
Managers who plan, organize, and run a business. Finance, marketing, and Human Resources
Notes to the financial statements
Notes clarify information presented in the financial statements and provide additional detail.
Current Liabilities
Obligations that a company expects to pay within the next year or operating cycle, whichever is longer.
Creditors
People who lend money
Each of the following is a major type of adjusting entry:
Prepaid expenses, accrued, accrued expenses
Which is an advantage of corporations relative to partnerships and sole proprietorships?
Reduced legal liability for investors
Genesis Company buys a $900 machine on credit. This transaction will affect the:
The balance sheet because when equipment is purchased on credit, assets are increased and liabilities are increased
The Periodicity Assumption
The economic life of a business can bed divided into artificial time periods
Accounting
The information system that identifies, records, and communicates the economic events of an organization to interested users.
useful life
The length of service of a productive asset
earnings management
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income
Financial Accounting Standards Board (FASB)
The primary accounting standard-setting body in the United States.
Revenue Recognition Principle
The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.
Expense Recognition Principle
The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.
chart of accounts
a list of a company's accounts
Adjusted trial balance
a list of accounts and their balances after all adjustments have been made
Trial Balance
a list of accounts and their balances at a given time
A company has purchased a tract of land. It expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. The land should be reported as:
a longterm investment
Income Summary
a temporary account used in closing revenue and expense accounts
note payable
a written promise to pay a creditor a certain amount in the future
Contra asset account
an account that is offset against an asset account on the balance sheet
fiscal year
an accounting period that is one year long
journal
an accounting record in which transactions are initially recorded in chronological order
Reversing entry
an entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period
fair value principle
assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability)
a balance sheet shows:
assets, liabilities, stockholders equity
Permanent Accounts
balance sheet accounts whose balances are carried forward to the next accounting period
debt financing
borrowing money
current assets are listed:
by order of expected conversion to cash
unearned revenues
cash received and a liability recorded before services are performed
What increases revenues?
credits
Queenan Company computes depreciation on delivery equipment at $1,000 for the month of June. The adjusting entry to record this depreciation is as follows:
debit depreciation expense by 1000 and credit accumulated depreciation equipment
The trial balance shows Supplies $1,350 and Supplies Expense $0. If $600 of supplies are on hand at the end of the period, the adjusting entry is:
debit supplies expense for 750 and credit supplies for 750
Assets are increased by?
debits
Bonds Payable
debt securities sold to investors that must be repaid at a particular date some years in the future
Adjustments for unearned revenues:
decrease liabilities and increase revenues
Adjusting entries are made to ensure that:
expenses are recognized in the period in which they are incurred, revenues are recorded in the period in which the performance obligation is satisfied, balance sheet and income statement accounts have correct balances at the end of an accounting period
prepaid expenses
expenses paid in cash before they are used or consumed
Are regulatory authorities considered internal or external users?
external
Three Business Activities
financing, investing, operating
Adjustments for accrued revenues:
increase assets and increase revenues.
The effects on the basic accounting equation of performing services for cash are to:
increase assets and increase stock holder's equity
The balance in retained earnings is not affected by:
issuance of common stock. It does show, dividends and net income/loss
equity financing
issuing shares of stock in exchange for cash
operating
making and selling goods or your services
Financing
obtaining funds or money capital to start and grow a business
Investing
purchasing resources, the company requires to operate AKA ASSETS. Ex: equipment, land, plant, inventory, supplies, or stocks and bonds
temporary accounts
revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period
T account
the basic form of an account
Book value
the difference between the cost of a depreciable asset and its related accumulated depreciation
Ledger
the group of accounts maintained by a company
debit
the left side of an account: assets expenses and losses, equity, sales, and gains
General journal
the most basic form of journal
Journalizing
the procedure of entering transaction data in the journal
posting
the procedure of transferring journal entry amounts to the ledger accounts
Depreciation
the process of allocating the cost of an asset to expense over its useful life
credit
the right side of an account: dividends, revenues and liabilities
Accounting Information System
the system of collecting and processing transaction data and communicating financial information to decision-makers