Accounting Comprehensive
(T/F) The fundamental activities of a business are selling activities and marketing activities.
False
Gilman Company declares and pays a dividend of $4000 to stockholders. Record this transaction:
Debit - Dividends Credit - Cash
A net loss ______ retained earnings :
Decreases
Activity Based
Depreciation rate = Depreciable cost / total hours expected
A distribution of net income to owners is called :
Dividend
Earnings per share ratio
Earnings per share = net income - dividends on preferred stock / average shares of common stock outstanding
Revenues minus expenses equals :
Net income
Book Value Equation
original cost - accumulated depreciation = book value
Double declining balance
- 2 / service life - depreciation expense = assets cost X depreciation rate
Goodwill equation
- assets - liabilities = net assets - purchase price - fair value of net assets = goodwill
GAAP assumptions
- monetary unit - going concern - economic entity - periodicity
What appears on the statement of stockholders equity?
-net income -beginning balance of retained earnings -dividends
The primary functions of accounting are to:
1. communicate information to decision makers 2. maintain records of a company's operations
The two primary functions of financial accounting are to:
1. communicate measurements to external parties 2. measure business activities
Accounting equation is:
Assets= Liabilities + Stockholder's equity
Return on assets = Profit margin X asset turnover
Net income / average total assets = net income / net sales X net sales / average total assets
Price - Earnings ratio
Price earnings ratio = stock price / earnings per share
Return on equity ratio
Return on equity = net income / stockholders equity (equals a percentage)
Return on the market value of equity ratio
Return on the market value of equity = net income/ market value of equity
The fundamental model of business valuation is commonly referred to as the:
accounting equation
Company
decrease in resources
Straight Line
depreciation expense = asset cost - residual value / service life =depreciable cost / service life
Stockholders
increase in resources
