Accounting activities for chpt. #1-2
Financial Statement headings
Company "Income statement", "Statement of...","Balance Sheet" Date "for the month ended..." (Balance sheet has just the date)
Credit (Cr)
Decreases amount on account (i.e. Revenue (S/E), Common stock (S/E).)
Company pays $25 dividends to shareholders
Dividends; Financing activity
Costs of Goods Sold (COGS)/ Cost of Sales (COS)
Expense; Income statement
Interest expense
Expense; Income statement
Selling Expenses
Expense; Income statement
Asset(stuff) accounts track the dollar amount of the physical asset and who owns that physical asset.
False
Debit (Dr)
Increases amount on account (i.e. Account receivable (A), Dividend (S/E).)
Accounts Payable (A/P)
Liability; Balance sheet
Notes Payable (N/P)
Liability; Balance sheet
Supplies are ...
NOT a long-term asset
Corporation borrows $100 from bank
Note Payable to bank; Financing activity
We buy a ship to smuggle for $2,000 from Fox Inc. However, since the ship costs ore than the cash we have, we generate a _________ with Fox Inc. Which will be paid out over two years.
Note payable
We obtain financing to invest in assets that we will use to perform our standard (day-to-day) business operations. The expected result of these operations is ________. However, our operations typically had costs, these costs are known as_________.
Revenue; Expenses
Sales/Revenue
Revenue; Income statement
Company provides $250 service to customer
Service revenue earned; Operating activity
Capital stock/Common stock
Stockholders Equity; Balance sheet
Retained Earnings (R/E)
Stockholders Equity; Balance sheet or Retained Earnings Statement
Debit
The left side of the account.an entry made to the left side of an account .
Credit
The right side of the account
Double entry accounting
The rule of accounting that specifics every transaction involved at least two accounts of debits and credits
In traditional accounting system all entries must be first put in the General Journal
True
The credit side of all accounts is the right side
True
The debit side of an asset account is the left side.
True
Equipment is ...
is a long-term asset
Order of financial statements
1-Income statement 2-Statement of retained earnings 3-Balance Sheet 4-Statement of cash flows
Chart of account
A list of all the accounts of a business and the numbers assigned to that account
Promissory note
A written pledge to pay a fixed amount of money at a later date
Company pays $50 on account for associated A/P account
Accounts Payable; Operating activity
Company receives $100 on account for A/R account
Accounts Receivable; Operating activity
The balance sheet is produced from the account balances shown in the trail balance.
True.
Inventories
Asset; Balance sheet
Land and buildings
Asset; Balance sheet
Office furniture
Asset; Balance sheet
Company purchases $50 worth of supplies
Cash; Operating activity
In exchange for cash, we give investors _________ in the company. i.e. ownership rights.
Common Stock
Company receives $300 from investor
Common stock; Financing activity
A company's accounting period must always be one month long.
False.
All entries must affect both the asset side and the liabilities +Equity side of the accounting equation system to stay in balance.
False.
The largest transaction occurring during the accounting period is always entered first in the General Journal.
False.
The note payable account is increased by a debit entry.
False. It is increased by credit entry.
Entries are posted from the general journal to the trail balance.
False. It is posted to the General ledger .
The trail balance lists all of the transactions that were entered into the asset, liability and equity accounts.
False. It shows summaries.
In an accounting system, if total assets are not equal to the total claims-to-assets, then the balance sheet report will simply be relabeled as the UnBalanced sheet
False. No such thing.
(T or F) Profit is what a company receives from the sale of their products.
False. Revenue is what the the company receives from the sale of their products.
The balance sheet is produced from the account balances shown in the General Journal.
False. Shown in the trail balance
After certain types of transactions it is ok for the accounting system to have more total assets (stuff) than total liabilities +Owners Equity(claims to stuff)
False; Fundamental principle says they need to be balanced.
Company purchases $100 of equipment on account
Accounts payable to store; Investing activity
Accounts Receivable (A/R)
Asset; Balance sheet
On account
On Credit (Asset)
T account
An informal account form used to summarize transactions. Where the top of the T holds the account title and the base divides the debit and credit sales of the account .
Cash
Asset; Balance sheet
The main purpose of Equity accounts is to keep track of owners' claims to an organizations assets
True
The main purpose of liability accounts is to keep track of non-owners' claims to an organizations assets.
True
For each entry in the general journal, the total dollar amount of the debits and the total dollar amount of the credits must always be equal.
True.
The balance sheet is a point-in-time financial report.
True.
The equipment account is increased by a debit entry.
True.
The inventory account is decreased by a credit entry.
True.
The primary reason accountants prepare a trail balance is to determine if the accounting system is in balance.
True.
The sequence of steps a company's account system goes through each accounting period is called the accounting cycle.
True.