Accounting 1 Final | Houke

Acid Test Ratio

(Current Assets - Inventory) / Current Liabilities

Fiscal Year

A fiscal period consisting of 12 consecutive months.

A business's record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is known as a(n):

Account

Accounting Equation

Assets = Liabilities + Owner's Equity

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

Assets, $30,000 decrease Liabilities, $30,000 decrease

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?

Assets, $38,000 decrease Liabilities, $38,000 decrease

Jay's Limo Services paid $300 cash to employees for work performed in the current period. What general journal entries will Jay's Limo Services make to record this transaction?

Debt Salaries Expense Credit Cash

T/F: Closing entries are required at the end of each accounting period to close all ledger accounts

False

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the

Income Statement

Financial Statements are typically prepared in the following order:

Income Statement, Statement of Retained Earnings, Balance Sheet

Two accounting principles central to accrual accounting basis that are relied on in the adjusting process are

Revenue Recognition Expense Recognition

Gross Margin

Sales - COGS

Account that is classified as an asset account

Supplies

A balance sheet lists

The types and amounts of assets, liabilities and equity of a business as of a specific date

Account that normally has a credit balance

Wages Payable

A business uses a credit to record:

a decrease in an asset account

Unearned revenue is reported in the financial statement as

a liability on the balance sheet

Measurement/Cost Principle

accounting principle that requires that all goods and services purchased be recorded at actual cost

Cost of Good Available for Sale (COGAS)

beginning inventory + net purchases

What asset does not depreciate?

land

Revenue Recognition Principle

provides guidance on when a company must recognize revenue