Accounting 210 Exam 1 Study Guide

If assets are $300,000 and liabilities are $192,000, then equity equals:

$108,000

If equity is $300,000 and liabilities are $192,000, then assets equal:

$492,000

A corporation is:

A business legally separate from its owners.

A general journal is:

A complete record of any transaction and the place from which transaction amounts are posted to the ledger accounts.

A limited partnership:

A partnership that has 2 different types of partners. May also be called a SpecialPartnership. A limited partnership must have at least one general and one limited partner.

A company's ledger is:

A record containing all accounts and their balances used by the company.

The length of time covered by a set of periodic financial statements, primarily a year for most companies, is referred to as the:

Accounting Period

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

Accrual basis accounting

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets, is called:

Accumulated depreciation

Operating activities:

An activity that directly affects an organization's cash inflows and outflows, and determine its net income (aka costs and expenses)

If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be:

Assets increases $4,500 and Liabilities increase $4,500

Prepaid accounts (also called prepaid expenses) are generally:

Assets that represent prepayments of future expenses.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Cash basis accounting

Palmer Company is at the end of its annual accounting period. The accountant has journalized and posted all external transactions and all adjusting entries has prepared an adjusted trial balance and completed the financial statements. The next step in the accounting cycle is:

Close temporary accounts

Identify the account below that is classified as an asset account:

Common Stock

An account linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n):

Contra Account

Golddigger Services, Inc. provides services to clients. On May 1, a client prepaid Golddigger Services $60,000 for 6-months services in advance. Golddigger Services' general journal entry to record this transaction will include a:

Credit to Unearned Management Fees for $65,000

The current ratio:

Current Assets/Current Liabilities, a liquidity ratio.

ABC Catering received $800 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Debit Cash 880 Credit Unearned Catering revenue 880

A credit entry:

Decreases asset and expense accounts, and increases liability, owner's capital, and revenue accounts.

Accounting is an information and measurement system that does all of the following except:

Eliminates the need for interpreting financial data

All of the following are true regarding ethics except:

Ethics do not affect the operations or outcome of a company

Decreases in equity that represent costs of providing products or services to customers, used to earn revenues are called:

Expenses

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold unless evidence shows that it will not continue is the:

Going-concern assumption

Net Income:

Is the excess of revenues over expenses

A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n):

Journal

Which of the following is NOT an asset account:

None of the above is an asset

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

One asset increases $1,300 and another asset decreases $1,300, causing no effect.

A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the:

Operating Cycle

The process of transferring general journal entry information to the ledger is called:

Posting accumulates the effects of journalized transactions. into individual accounts.

External users of accounting information include all of the following except:

Purchasing managers

The main purpose of adjusting entries is to:

Record internal transactions and events

On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received?

Revenue Recognition Principle

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any non-cash assets received from customers in exchange for goods or services, is called the:

Revenue recognition principle

A report that lists a business's accounts and their balances, in which the total debit balances should equal the total credit balances, is called a(n):

Trial Balance

An adjusting entry could be made for each of the following except:

Unearned revenues

A partnership:

a business organization owned by two or more persons who agree on a specific division of responsibilities and profits

The total amount of depreciation recorded against an asset over the entire time the asset has been owned:

accumulated depreciation

A debit:

an amount recorded on the left side of a T account

The right side of a T-account is a(n):

credit

Richard Redden, the sole stockholder, contributed $70,000 in cash and land worth $130,000 in exchange for common stock to open a new business, RR Consulting. Which of the following general journal entries will RR Consulting make to record this transaction?

debit: cash $70,000 & land $130,000credit: common stock for $200,000

Adjusting entries:

journal entries recorded to update general ledger accounts at the end of a fiscal period

Which of the following assets is not depreciated?

land

The accounting principle that requires revenue to be recorded when earned is the:

revenue recognition principle