Accounting 1 Final Exam
Unearned Revenue is always...?
A liability
The right side of an account is used to record...?
Credits
Journalize sale of Treasury Stock
DEBIT: cash CREDIT: treasury stock paid in capital, treasury stock
Journalize purchase of Treasury Stock
DEBIT: treasury stock CREDIT: cash
The left side of an account is used to record...?
Debits
What do closing entries accomplish?
-transfers revenues, expenses, & dividends to RE - Zero's out the revenues, expenses, & dividends to prepare these accounts for the next accounting period -brings the RE account to its correct ending balance
Straight- Line Depreciation Formula
[ (Cost- Residual Value) / useful life in years] X (months in use / 12 months)
What type of account is Treasury Stock?
a contra-equity account
Treasury Stock
a corporations own stock that it reacquires
Corporation
an organization form that can have an indefinite life
Sole Proprietorship
an organization form with a single owner
Partnership
an organization form with two or more owners
Fiscal Period
any consecutive 12 month period
Transaction
any event that affects a firm's financial position
Par Value
arbitrary amount assigned to a share of stock at time of incorporation
Ending Retained Earnings Formula
beg.RE + net income - dividends
Depreciation Expense
building, furniture, and land improvments
Retained Earnings
capital earned through profitable operation of the business
Paid-In Capital
capital from investments by the stockholders
Quick Assets Formula
cash + short-term investments + net receivables
An asset is classified as current if it will become...?
cash, be sold, or be used up within 12 months
Example of Stockholders' Equity
common stock, dividends, etc.
Payment of Dividends
financing (decrease)
Payment of long-term Note Payable
financing (decrease)
Purchase of Treasury Stock
financing (decrease)
Proceeds from insurance of Common Stock
financing (increase)
What inventory costing method assigns the newest, most recent, costs incurred during the period to ending inventory?
first-In, first out (FIFO)
Amotorization Expense
franchises, patents, copyrights, and trade marks
Gross Profit % Formula
gross profit / net sales revenue
Purchase of Equipment
investing (decrease)
Proceeds from sale of Land
investing (increase)
"We record transactions first in a _____. Then we post, or copy, the data to the _____. It is helpful to list all the accounts with their balances on _______."
journal; ledger; trial balance
Earnings Per Share Formula
net income / average # of shares outstanding
Net Income % Formula
net income / net sales revenue
What are the 3 main categories of cash flows reported on a cash-flow statement? (order of importance)
operating investing financing
Current Assets
operating (decrease)
Current Liabilities
operating (decrease)
Depreciation Expense
operating (increase)
Stockholders' Equity
paid- in capital PLUS retained earnings
What are the two basic sources of Corporate Capital?
paid- in capital and retained earnings
The Statement of Cash Flows helps predict future cash flow by reporting ______ cash ________ and ________, which are good predictors of future cash flows.
past; receipts ; payments
Dividends
payment of cash to the owners of a corporation
What 3 things are necessary for fraud to occur?
perceived pressure perceived opportunity rationalization
Quick Ratio Formula
quick assets / current liabilities
Matching Principle
records expenses when incurred to sell goods or provide services
Accrual- Basis Accounting
records the impact of a business event as it occurs regardless of whether the transaction affected cash
Net Sales Revenue Formula
sales revenue - sales returns- sales discount
Example of Revenue
service revenue, etc.
Generally Accepted Accounting Principles
standards developed by FASB
Business Entity Principle
states that an organization that stands as a separate economic unit must not have its financial affairs confused with that of other entities
Reliability Principle
states that data must be verifiable
Cost Principle
states that the acquired assets and services should be recorded at their actual cost
Revenue Recognition Principle
states that you must record revenue only AFTER you've earned it
Outstanding Stock
stock in the hands of stockholders
Preferred Stock
stock that gives its owners certain advantages over common stockholders, such as the right to receive dividends before the common stockholders
Common Stock
the basic form of capital stock
Legal Capital
the portion of stockholders' equity maintained for the protection of creditors
Example of Liabilities
accounts payable,etc.
Examples of what's on a Balance Sheet
accounts receivable, notes payable, retained earnings (also on Statement of RE), office supplies, etc.
Example of Assets
accounts receivable, office supplies, cash, land, prepaid rent, etc.
Examples of what's on an Income Statement
advertising expense, service revenue, etc.
Liabilities
debt owed to outsiders
Land DOES NOT ...?
deplete, depreciate, or amortize
Disadvantage of organizing as a Corporation
double taxation
Advantages of a Corporation
ease of transferring ownership indefinite life limited stockholder liability
Assets
economic resources of the business (what you own or control)
Current Ratio Formula
total current assets / total current liabilities
What is the term for a company's own stock that is issued and repurchased?
treasury stock
Example of Expense(s)
utilities expense, lease expense, salaries expense, rent expense, etc.
