ACC2000 Midterm (add account types!)
Straight Line Depreciation =
(Cost - Residual Value) / Useful life
8 Accounting Elements
1. Assets 2. Liabilities 3. Equity 4. Common Stock 5. Retained Earnings 6. Dividends 7. Revenue 8. Expenses
Expenses can be defined as _____.
1. Assets Consumed 2. Services used in the process of generating revenues 3. Costs that have been incurred during the normal course of business (All of the above)
4 Basic Financial Statements
1. Balance sheet 2. Statement of Equity and Retained Earnings 3. Income Statement 4. Statement of Cash Flow
5 Sections of a Multi-Step Income Statement
1. Sales 2. Cost of goods sold 3. Gross Profit 4. Operating Income 5. Selling expenses 6. Administrative expenses 7. Other revenue and expenses
Wages Owed Calculations
1. Total weekly wages / 5 day work week = wages for one day 2. Wages owed = wages for one day x # of unpaid days
*Total Assets (REVISE)
Accounts Receivable + Cash + Equipment + Etc.
Liabilities
Amounts OWED to creditors
Basic Accounting Equation
Assets = Liability + Equity
ABC Company deposited $20,000 in a bank account in return for issuing shares in the corporation. This transaction would affect which two financial statement elements?
Assets and Stockholders' equity
4 Basic Accounting Equations
BASIC ACCOUNTING EQUATION: Assets = Liability + Equity Equity = Contributed capital (stock) + ending retained earnings Ending Retained Earnings = beginning retained earnings + Net income - Dividends Net income = Total Revenue - Total expenses
Ending Retained Earnings =
Beginning retained earnings + Net income - Dividends
FOB Shipping Point
Buyer pays freight costs
Equity =
Contributions + Ending retained Earnings
The book value of an asset is computed as the asset's _____.
Cost less accumulated depreciation
Accrual accounting does not require that the accounting records be updated prior to preparing financial statements (T/F)
False
All merchandising businesses are organized as corporations (T/F)
False
Dividends are an example of an expense (T/F)
False
Expenditures made to extend an asset's life are called revenue expenditures (T/F)
False
Expenditures made to extend an asset's life are called revenue expenditures.
False
Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as credit sales (T/F)
False
The estimated amount that an asset can be sold for at the end of its useful life is called its book value (T/F)
False
The ownership of a proprietorship is divided into shares of stock owned by its stockholders (T/F)
False
When merchandise that was sold is returned, the seller decreases accounts payable (T/F)
False
Characteristic of fixed assets
Fixed assets are long-term or relatively permanent assets
Which of the following should be included in the acquisition cost of a piece of equipment?
Installation Cost
Assets
Items OWNED by a business
_____ is reported as a current asset on balance sheet
Merchandise inventory
Which of the items below is not a business organization form?
Multi-venture
In credit terms of 1/10, n/30, the "1" represents the _____.
Percent of the cash discount
2 Financial Goals of Business
Profitability & Liquidity
Which of the following types of organizational forms is popular for its ease of formation and low cost of organizing?
Proprietorship
The gross increases in stockholders' equity attributable to business activities are called _____.
Revenues
Net Income =
Revenues - Expenses
Liquidity
The ability to pay your debt
Profitability
The state of yielding financial gain
Stockholders Equity =
Total assets - Total liabilities
Net Income =
Total revenues - Total expenses
By keeping a running total of the effects of transactions, the accounting equation provides a framework for summarizing the effects of a series of transactions (T/F)
True
By keeping a running total of the effects of transactions, the accounting equation provides a framework for summarizing the effects of a series of transactions.
True
Separating the responsibilities for purchasing, receiving, and paying for equipment is an example of the control procedure: separating operations, custody of assets, and accounting (T/F)
True
The accrual basis of accounting requires revenue to be recorded when the service is performed (T/F)
True
The internal control environment is enhanced by the hiring and retention of competent, honest employees (T/F)
True
*Liabilities (REVISE)
Utility bills, Rent, etc.
Revenues received from providing services are referred to as _____.
fees earned
FOB Destination
seller pays freight costs