ABUS 261

5. stable moretary unit concept

"dollar" purchasing power is stable

Assets; debit

+

capital; credit

+

expense; debit

+

liabilities; credit

+

liabilities; debit

+

revenue; credit

+

revenue; debit

+

withdrawals; debit

+

Assets; credit

-

capital; debit

-

expense; credit

-

withdrawals; credit

-

increase asset and increase liability

-"purchase on account" -"borrow from bank"

"on account"

-purchased -sale

Accrual basis

-report revenues when they are earned, but not collected -report expenses when they are incurred, not when they are paid

closing entries

1) close revenue accounts to"income summary" (account) 2) close expense accounts to income summary 3) close income summary to capital 4) close withdrawals to capital account -on trial balance an imaginary line above sales revenue

Financial Reports

1) income statement 2) Statement of owner's equity 3) balance sheet

3. Cost principle

Acquired assets and services should be reported at actual cost (historical cost)

Accounting equation

Assets= Liabilities + Owner's Equity

GAAP

Generally Accepted Accounting Principles

prepaid expense is always a (an) a. asset b. revenue c. liability d. owner's equity

a. asset

cash account is a(n) a. asset account b. liability account c. expense account d. revenue account

a. asset account

John sold vegetables on account. How does this transaction affect the accounting? a. assets increase; owner's equity increases b. assets decrease; owner's equity decrease c. assets increase; owner's equity decreases d. liabilities increase; owner's equity decreases

a. assets increase; owner's equity increases

Which of the following financial statements lists the entity's assets, liabilities, and owner's equity as of a specific date? a. balance sheet b. statement of owner's equity c. income statement d. statement of cash flows

a. balance sheet

which of the following accounts is NOT an example of owner's equity? a. cash b. capital c. withdrawals d. revenue

a. cash

An liability is paid with cash. How does paying this liability affect the accounting equation? a. there is an equal decrease in another b. there is an equal decrease in owner's equity c. there is an equal decrease in a liability account d. none of these is possible

a. there is an equal decrease in another

2. reliability principle

accounting information must be verifiable, free from bias

Assets

all resources useful for the business -cash -supplies -machines -buildings -land

equity

amount invested in the business by its owner -purchased with own money -cash -supplies -machines -buildings -land expenses: - revenues: + capital: + withdrawals: -

accrued expnases

are expenses already incurred, but not paid yet

prepaid expense

asset

permanent accounts

assets liabilities capital -ending balance will be earned forward to next year

Which item is a liability? a. Utility expense b. accounts payable c. accounts receivable d. owner withdrawals

b. accounts payable

the adjusted trial balance shows a. amounts that may be out of balance b. amounts ready for the financial statements c. revenues and expenses only d. assets, liabilities and owners equity only

b. amounts ready for the financial statements

Owner's equity is $210,000 and total liabilities are $90,000. What would total assets be? a. liabilities decrease; owner's equity increases b. assets decrease; liabilities decrease c. assets increase; liabilities increase d. assets increase; liabilities decrease

b. assets decrease; liabilities decrease

adjusting entries never involve a. assets b. cash c. liabilities d. revenues

b. cash

what type of account is accumulated depreciation- building and what is its normal balance? a. expense, debit b. contra asset, credit c. revenue, credit d. asset, debit

b. contra asset

a capital account a. is increased by debits b. is increased by credits c. is a debit normal balance account d. is decreased by credits

b. is increased by credits

which sequence correctly summarizes the accounting process? a. journalize transactions, post to the accounts, prepare a trial balance b. journalize transactions, prepare a trial balance, post to the accounts c. post to the accounts, journalize transactions, prepare a trial balance d. prepare a trial balance, journalize transactions, post to the accounts

b. journalize transactions, prepare a trial balance, post to the accounts

which of the following is the book (or printout) holding all the accounts? a. account b. ledger c. journal d. trial balance

b. ledger

Trial balance doesn't =

balance sheet

all of a company's accounts and their balances appear on which of the following? a. statement of owner's equity b. balance sheet c. adjusted trial balance d. income statement

c. adjustment trial balance

in accounting, the matching principle means to match which of the following? a. revenues to liabilities b. expenses to assets c. expenses to revenues d. expenses to liabilities

c. expenses to revenues

The balance sheet reports? a. financial position for a specific period b. results of operations on a specific date c. financial position on a specific date d. results of operations fora specific period

c. financial position on a specific date

which of the following is the chronological record of transactions? a. account b. ledger c. journal d. trial balance

c. journal

unearned revenue is always a (an) a. asset b. revenue c. liability d. owner's equity

c. liability

which of the following accounts is NOT an example of an asset? a. cash b. accounts receivable c. notes payable d. supplies

c. notes payable

an accrued expense is an expense that a. a business has paid, but not yet incurred b. will be incurred and paid in the future c. the business has incurred, but not yet paid d. has been paid and incurred

c. the business has incurred, but not yet paid

which of thefollowing statements correctly describes a trial balance? a. trial balance is the first step in the accounting cycle b. trial balance is also known as the chart of accounts c. trial balance is a list of all accounts with their balance d. trial balance is also known as a balance sheet

c. trial balance is a list of all accounts with their balance

journal

chronological record of transactions

Accounting is the information system that provides information to various users. What process(es) does this include? a. measuring business activity b. processing the data into reports c. communicating the results to decisions makers d. all of the above

d. all of the above

Adjusting entries are made to ensure that a. expense are recognize in the period in which they are incurred b. revenues are recorded in the period in which service are performed or goods are delivered c. balance sheet and income statement accounts have correct balances at the end of an accounting period d. all the above

d. all the above

which of the following groups of accounts have a normal debit balance? a. liabilities and owner's equity b. assets and liabilities c. revenues and expenses d. assets and expenses

d. assets and expenses

an individual asset (a truck for example) is increased. Which of the following is possible? a. There is an equal decrease in another asset b. There is an equal decrease in owner's equity c. there is an equal decrease in a liability account d. assets increase; liabilities decrease

d. assets increase; liabilities decrease

the left side of an account is used to record which of the following? a. decrease b. increase c. credit d. debit

d. debit

John paid wages expenses totaling $15,000. How does this transaction affect the accounting equation? a. increases assets and decreases liabilities b. increases both assets and owner's equity c. decreases assets and increases liabilities d. decreases both assets and owner'sequity

d. decreases both assets and owner'sequity

accrued everyone is which of the following? a) revenue that has been collected and earned b) revenue that the business has collected but not yet earned c) revenue that will be collected and in earned in the future d. revenue that the business has earned but not collected

d. revenue that the business has earned but not collected

which of the following accounts is increased with credit? a. withdrawals b. supplies expense c. accounts receivable d. sales revenue

d. sales revenue

Liabilities

debts payable to outsiders (creditors) payables

account

detailed record of the changes in a particular asset, liability, or owner's equity

matching principle

expresses to be recorded when they are incured

external- investors, creditor, tax authorities

financial accounting

unearned revenue

liabilities account

trial balance

list of all the accounts with their balances

internal- managers

management accounting

normal balance

on increase side balance

1. Entity

organization that pays stands apart as a separate economic unit

cash basis

report cash receipt as revenue and cash payment as expense -no receivables -no payable -no adjustment

temporary accounts

revenues (all) expenses (all) withdrawals -ending balance need to be closed (zero out)

accrued revenue

revenues already earned, but not yet collected

revenue principle

revenues to be recorded when they are earned at the actual account

depreciation

the allocation of a long-term asset -contra asset

ledger

the book holding of all accounts

4. Going- Concern Concept

the entity will remain in business for foreseeable future

trial balance -------> adjusted trial balance

worksheet