accounting midterm
what is created when you owe cash through informal debt
a liability account, ( accounts payable) is created
When an inventory system updates the Inventory account at the time of each sale, this is known as
a perpetual system
an increasing inventory turnover indicates
a shorter time span between the purchase and sale inventory
when revenue is recorded in the period it is earned and expenses are recorded when they are incurred, what basis of accounting are we using ?
accrual basis
conversion agents
add value by transforming basic resources into goods and services that consumers demand
which type of accounting information is intended to satisfy the needs of internal users of accounting information?
managerial accounting
The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the
matching principle
statement of changes in stockholders' equity
measures performance for a period of time
Physical Resources
natural resources
Financing Activities
obtaining cash from owners or from creditors and paying cash owners (dividends) or creditors
3 major section of the statements of cash flow
operating activities investing activities financial activities
elements of the fraud triangle
opportunity, pressure, rationalization
what entitle investors to share in the distribution of income.
ownership interest
what is not included in cash
a bank certification of deposit for one year
Financial Accounting
accounting information focused on the needs of external users
Managerial Accounting
accounting information focused on the needs of internal users
manufacturing business
makes the goods that they sell to their customers
in order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of the accounting period for?
both the periodic and perpetual inventory systems
what would be added to the balance per bank statement in a bank reconciliation?
deposit in transit
Accural
describes a revenue or an expense event that is recognized before cash is exchanged
Financial Accounting Standards Board (FASB)
establishes measurement and reporting rules that businesses use to facilitate communication
a net loss occurs when
expenses are greater than revenues
which type of accounting information is intended to satisfy the needs of external users of accounting information?
financial accounting
in which section of a statement of cash flows would the repayment of a note(borrowed funds ) be reported?
financing activities
FOB destination =
free to destination shipper is paying
service businesses
include doctors, attorneys, accountants, dry cleaners, and housekeepers, provide services to their customers
labor resources
include intellectual and physical labor
what follows the matching concept
income statement
which of the financial statements are required by the generally accepted accounting principles (GAAP)
income statements, statements of changes in stockholders equity, statements of cash flow
asset source transaction
increase the total amount of assets and increase the total amount of claims
the purchase of office equipment at a cost of 2,600 with an immediate down payment of 1,200 and agreement to pay the balance within 60 days is recorded in the accounts by:
increasing office equipment for 2,600, decreasing cash for 1,200 and increasing accounts payable for 1,400
what would be added to the balance per book in a bank reconciliation
interest on customer note
what does resource owners include
investors and creditors
Investing Activities
involve paying cash (outflow) to purchase long-term assets or receiving cash (inflow) from selling long-term assets
Operating Activities
involve receiving cash (inflow) from revenue and paying cash (outflow) for expenses
what happens if a company is forced to liquidate
its total assets would be distributed first to creditors , with any remaining amount going to the owners (investors)
if retained earnings decreased during the year and no dividends were paid what happens?
the company experienced a net loss for the year
what does the statement of changes in stockholders equity explain
the effect of transactions on stockholders equity during the accounting period. it starts with the beginning balance in the common stock account and ads or subtracts any changes that occurred during the the accounting period. the statement that also describes the changes in retained earnings for accounting period
the Lifo inventory costing method assumes that the cost of the units most recently purchased is
the first to be assigned to the cost of goods sold
Transaction Analysis
the heart of accounting and financial statement preparation
Generally Accepted Accounting Principles (GAAP)
the measurement rules established by the FASB
liquidation
the process of dividing up assets and allocating them to creditors and investors
at the year end inventory count, if goods are shipped FOB destination they should be included in an inventory count of
the seller
among the assets listed below, which one is considered the most liquid?
-accounts receivable -merchandise inventory -cash -prepaid rent cash
what questions are we trying to answer in the process of the transaction analysis
-what accounts are involved -for each account involved, what type of account is it (assets,liabilities of stockholders equity) -is the account balance increasing or decreasing as a result of the transaction
beta company reported assets of 2,400 and liabilities of 800. what amount will beta report to stockholders equity ?
1,600
Jordan's company borrowed 4,000 cash on June 1,2018. The loan had a one year term and a 6 percent annual interest rate. What is the amount of interest expense that must be recognized on the December 31,2018 income statement
140
asago co. sold 18,000 of merchandise to health co. on account, with terms 2/15, net 45. the cost of merchandise sold was 15,500. Health Co, returned 1,750 for merchandise that originally costed 1,400. Asago credited this return to Health Cos account , which health co paid in full within the discount period. what is the amount of net sales from the above transaction
15,925
Genuine Parts received a promissory note from a customer on March 1,2018. The face amount of a note is 8000, with terms of 90 days and 9% interest what is the total amount of interest that Genuine parts will receive when the note is paid
180
on jan 1,2019. the enid company had beginning balances as follows: total assets of 9,500, total liabilities of 1,500 and common stock of 2,500. during 2019, enid paid dividends to its stockholders of 1,300. given that retained earnings amounted to 8,000 at the end of 2019, what was enids net income for 2019
3,800
during the accounting period revenue amounted to 7,400. cash collections of accounts receivable amounted to 2,300. expenses for the period were 3,000. the company paid dividends of 800. what was the net income for the period.
4,400
Martin uses the perpetual inventory system and FIFO cost flow method. During the year, Martin purchased 400 units of inventory that costs $12 each and then purchased an additional 600 units that costs 16 each. If martin sells 700 units of inventory, what is the amount of cost of goods sold.
9,600
retained earnings at the beginning and ending of the accounting period were 500 and 1000. expenses of 350 and dividends paid to stockholders of 50 were reported during the period. what was the amount of revenues reported in the period?
900
Income Statement
A financial statement showing the revenue and expenses for a fiscal period.
which inventory method assigns the most recent costs to ending inventory
FIFO
FASB
Financial Accounting Standards Board
GAAP
Generally Accepted Accounting Principles
financial accounting standards are known as GAAP. what does the acronym stand for?
Generally accepted accounting principles
asset exchange transaction
Increase one asset, decrease another asset. The total amount of assets is not affected.
claims exchange transaction
Increase one claims account, decrease another. total amount of claims is not affected
which inventory costing method will produce an amount for cost of goods sold that is closest to current market value
LIFO
what action did the U.S. Congress take because of the audit failures at enron, world con and other companies ?
Passed the sarbanes - oxley act
net income =
Revenues - Expenses
the foundation for a company's financial statement is the
accounting equation
what is not a primary role of independent auditor
advise client on tax strategies
accounting equation
assestes = liabilities + stockholders equity
paying employee salaries is an example of which type of transaction
asset use
financial elements defined by the FASB are
assets liabilities equity contributed capital revenue expenses distribution net income
a company issues common stock for cash.What is the effect on the company's accounting equation?
assets and stockholders equity increase
carl and stefanie each invest 15,000 in a business and are given shares of stock in Thibeau industries as evidence of their own ownership interests . for this transaction, identify the effect of the accounting equation
assets increase and stockholders equity increases
the balance in the cash account is reported on which financial statement(s)
balance sheet and statement of cash flows
when a business provides services for cash, which elements of the accounting equation are affected?
cash and revenue
what is not an audit opinion that a company can receive on its financial statement
clean opinion
2 distinct parts equity can also be viewed as
common stock and retained earninga
3 distinct participants for the market for business resources involves
consumers conversion agents (businesses) resource owners
sales discounts is classified as what type of account
contra - revenue
the statement of changes in stockholders equity presents an explanation of the changes in the beginning and ending balances of what two stockholders equity accounts ?
contributed capital ( stock) and retained earnings
Resource owners
control the distribution of resources to conversion agents
what describes "cost of goods available for sale"
cost of goods available for sale is allocated into cost of goods on hand and the cost of goods sold and the end of the fiscal year
which one of the following accounts most likely would appear on the income statement of a merchandising company, but not on the income statement of a service company
cost of goods sold
asset use transaction
decrease the total amount of assets and the total amount of claims on assets
Investors
provide resources in exchange for ownership interests in business .
Creditors
provides financial resources to a businesses on a lending basis.
what do strong internal controls provide
reasonable assurance that the objectives of a company will be accomplished
if the market value of goods in inventory falls to 26,000 below its cost, the company should ?
reduce the inventory account by 26,000
retained earnings
represents assets obtained through the earning activities
common stock
represents assets received from investors
realization
results in collecting cash, generally from the sale of products or services
recognization
results in formally recording an economic event in the financial statements
the income statement generally includes which two elements of financial information?
revenues and expenses
many different forms orginizations exist in
service businesses merchandising businesses manufacturing businesses
Balance Sheet
shows the companys financial condition at the end of each accounting cycle
which of the following would be reported in the cash flow from investing activities section of a statement of cash flows?
sold land for cash
merchandising businesses
sometimes called retail or wholesale companies, sell goods to customers that other entities make
matching concept
states that the income statement matches asset increases ( revenues ) with assets decreasing (expenses ) from operating the buisness
zinc company understated its beginning inventory at the end of 2018. what reflects the effect of the error on the amount shown on the 2018 financial statements?
total assets and gross margin are understated
lew company provided services to a customer for 3,500 cash. what happened
total assets increased and net income increased
the process of buying and selling inventory is known as inventory
turnover
Consumers
use resources
when will accounts payable be romoved from the books
when the amount owed is payed in cash
