Accounting Knowledge Check Review

If total liabilities decreased by $50600 and stockholders' equity increased by $30800 during a period of time, then total assets must change by what amount and direction during that same period?

$19800 decrease

Retained Earnings Formula

+ Beginning retained earnings + Net income during the period - Dividends paid = Ending retained earnings

The historical cost principle requires that when assets are acquired, they be recorded at

Cost

The private sector organization involved in developing accounting principles is the

Financial Accounting Standards Board

GAAP

Generally Accepted Accounting Principles

The procedure of transferring journal entries to the ledger accounts is called

Posting

Unearned revenue is classified as

a liability account

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales

allowance

retained earnings

beginning retained earnings + net income - dividends

Accrual Basis Accounting

reporting income when it is earned and expenses when they are incurred

The normal balance of any account is the

side that increases that account

The revenue recognition principle dictates that revenue should be recognized in the accounting records

when services are performed

The expense recognition principle matches

expenses with revenues

The income summary account

is a temporary account

Revenues would not result from

issuance of common stock

The Sales Returns and Allowances account is classified as a(n)

contra revenue account