Chapter 3 Accounting

What is permitted under current U.S. GAAP?

Accrual-basis accounting

A classified balance sheet shows subtotals for current () and current()

Assets liabilities

Match the account with the correct terms: Permanent

Assets, Liabilities, Equity

A Balance sheet reports:

Assets, liabilities, stockholders' equity

Reporting revenues only when cash is received and expenses only when cash is paid is called the () basis of accounting.

Cash

Pizza Company prepaid 3 months' store rent. The journal entry to record this transaction includes:

Debit to Prepaid Rent Credit to Cash (Cash goes down)

The closing entry for expense accounts involves the following journal entry.

Debit: Retained earnings Credit: Expenses

What is the order in which liability accounts would appear on a company's balance sheet.

In the order that the payable is due the soonest. Ex: Note payable (due in 5 months) Note payable (due in 5 years) Mortgage payable (due in 25 years)

Which line items appears in an income statement?

Key words: Revenue & Expenses Answers: Sales Revenue Salaries Expense Income Tax Expense

If an adjusting entry's debit is to an expense account, then the credit must be to a

Prepaid Expense- because the expense is incurred Liability- because the expense has not yet been paid, i.e., is owed

On a classified balance sheet, long-term assets may be reported in these sub-categories:

Property, plant, and equipment Long-term investments Intangible assets

() is the price earned from selling goods or services to customers.

Revenue

Match the account with the correct terms: Temporary

Revenues, Expenses, dividends

If a company determines that it has $1,400 of supplies on hand at the end of the period, which of the following statements is correct?

The company has $1,400 in supplies remaining at the end of the period.

Neumann Corporation purchases supplies that will be used during the following quarter. At the time of purchase, the supplies should be recorded as an()

asset

An asset that can quickly be turned into cash has the characteristic of

liquidity

If revenues are greater than expenses, the company generated net income. If expenses are greater than revenues, the company generated a net ()

loss

An Income statement reports:

revenue minus expenses