ACCOUNTING TEST 1 NOTES
On August 1, 2015, Xcel Auto Repair, Inc. paid $6,000 for six months rent. After adjusting entries are made, what will be the balance of Prepaid Rent on December 31, 2015?
$1,000
If net income is $80,000, dividend is $ 24,000, and ending RE balance is $105,000. How much is beginning RE?
$49
A two year insurance policy in the amount of $2,400 was purchased on Feb 1, 2015 and was recorded by debiting the prepaid insurance account. At the end of its fiscal year at June 30, 2015, the firm will have to recognize insurance expense of :
$500
During September, Amy's shop had revenue of $4,500 and expenses of $1,600, and $1,350 paid as dividends. If the Retained Earnings on September 30 was $9,000, the Retained Earnings on September 1 must have been:
$7,450.
During the year, EcoWash has $120,000 in revenues, $50,000 in expenses, and $4000 in dividends. Retained Earnings is changed by
+$66000
how many trial balances are done each month?
3 trial balances
On Oct. 1, Basher Company received $1,000 from a customer as advance payment for services to be rendered, and credited Unearned Revenues at the time of receipt. By Dec. 31, Basher had performed $750 of services. The adjusting journal entry at Dec.31 would include:
A debit to unearned revenues for $750.
An increase in an expense account could be balanced in a journal entry by doing what?
A decrease in an asset account.
Which of the following aspects relate to the information provided in an income statement?
Ability to earn a profit from its operations during the current period.
What is the system that maintains records of a company's operations and then communicates that information to decision makers?
Accounting
The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as what?
Accrual basis accounting
What system of accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company?
Accrual basis accounting
An example of a contra- asset account is what?
Accumulated depreciation
what is the equation for net worth?
Assets - Liabilities = Net Worth
What does a balance sheet list on a specific day?
Assets, utilities payable, and stockholder's equity
Which of the following aspects relate to the information provided in an income statement?
Assurance that the company will pay its obligations when they become due
When are adjusting entries made?
At the end of the accounting period
What are the four financial statements that are published to provide information to external users?
Balance Sheet, Statement of cash flows, Income Statement, Statement of Stockholder's equity
What are some financial statements?
Balance sheet, Statement of stockholder's equity, income statement.
What appears on the statement of stockholder's equity?
Beginning balance of retained earnings, Net income and Dividends
Reporting revenues only when cash is received and expenses only when cash is paid is called what system of account?
Cash basis of accounting
Which accounts appear on the balance sheet?
Cash, receivables, payables
Adjusting entries help to ensure that all what are recorded in the period in which they incurred?
Closing entries
What are the primary functions of accounting?
Communicate information to decision makers and to measure a company's activities
The form of business organization where an entity is legally separate from its owners and issues shares of stock is a?
Corporation
Those obligations of a firm that must be either paid in cash or settled by providing goods or services within one year are referred to as:
Current liabilities.
A business acquires equipment for $140,000 on January 1. The equipment has a life of seven years and 0 salvage value. Which of the following is the adjusting entry required on December 31?
Debit $20,000 to Depreciation Expense, credit $20,000 to Accumulated Depreciation
If 1 year of rent paid in advance on January 1. 2015 was debited to prepaid rent, what adjusting entry is needed to adjust on 1/31/2015?
Debit rent expense, credit prepaid rent.
Paying on Accounts Payable would result in:
Dr. Accounts Payable, Cr. Cash
Received utility bill, the bill will be paid at a later date:
Dr. Utility Expense, Cr. Utility Payable
The private sector organization that is currently responsible for setting accounting standards in the United States is the?
Financial accounting standards board
What are the three classifications on the statement of cash flows?
Financing activities, investing activities and operating activities
what is the body of rule and procedure that guides the measurement and communication of financial accounting info known as?
GAAP
what does GAA stand for?
Generally accepted accounting principles
Purchasing a building for $110,000 by paying cash of $15000 and signing a note payable for $95000 will do what?
Increase both total assets and total liabilities by $95,000.
What are characteristic features of corporations?
Limited liability for investors, ability to make contracts in its own name, ownership rights proportional to shares, articles of incorporation
What are the two sources of stockholders equity amounts?
Money paid in from shareholders and money earned by the corporation
What does an income statement report?
Net income/loss, expenses and revenues
At the end of an accounting period, the office supplies account shows a balance of $500, but the actual supplies on hand amount to only $300. If this situation calls for an adjusting entry, what account should be debited?
Office supplies expense
Which of the following prepayments requires an adjusting entry at the end of the year?
On November 1, the company pays rent for the next six months.
According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess?
Predictive value and confirmatory value
Which of the following accounts would appear in the Balance Sheet debit column?
Prepaid insurance
Which of the following are attributes of FASB?
Private sector organization, fulltime board members, independence
What is an advantage of the corporate from of organization?
Provides limited liability to stockholders
Which of the following is an external transaction?
Purchasing supplies from a vendor
What is the accumulated net income since the inception of the corporation and not yet paid to shareholders known as?
Retained Earnings
What term represents the net income earned by a corporation and not yet paid to shareholders?
Retained Earnings
what accounts increase with a credit?
Revenue, accounts payable, common stock
What does credit mean?
Right side
What are the three most common forms of business organizations?
Sole Proprietorship, Partnership, Corporation
What is the complete account equation? ASSETS=LIABILITITES + ______
Stockholder's equity
What is the financial statement that displays a firm's financial position a particular date?
The balance sheet
Which financial statement reports revenues and expenses?
The income statement
What must result if the revenues minus the expenses is less than the amount of the dividends paid?
The retained earnings account decreases.
A journal entry for a $75 payment for rent expense was posted as a debit to salary expense and a credit to cash. No other mistake was made. This error will cause which of the following conditions on the trial balance?
The sum of the credits will still equal the sum of the debits.
What is the purpose of a statement of cash flows?
To provide information about cash receipts and cash disbursements during a period
The accountant for Hobson Electrical Repair Corporation failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year. Which of the following is true?
Total liabilities are understated.
What do adjusting entries do?
Update the accounts to their proper balances, and are needed before financial statement preparation.
Which of the following appears on the balance sheet?
Utilities payable, common stock, and accounts receivable
Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31?
a company pays a 6th month insurance premium at the beginning of october and a company pays for 4 months of advertising in the wall street jorunal on november 1st
what is deffered revenue/unearned revenue?
a liability
Which of the individuals listed below is most interested in financial statements produced in accord with generally accepted accounting principles (GAAP)?
a loan officer reviewing a loan application, and a potential stockholder of a corporation
Which of these would be found on a company's balance sheet?
accounts receivable, notes payable, equiptment
what method does gaap require?
accrual method of accounting
on what kind of basis is interest done?
an annual basis
What is the financial statement that summarizes revenues and expenses for a period of time?
an income statement
Adjusting entries ensure that what balances are reported at amounts representing the economic benefits that remain at the end of the period?
asset
what are the resources of a company referred to as?
assets
what effect does the payment of dividends have on the accounting equation?
assets decrease and equity decreases
what accounts increase with a debit?
assets, expenses, dividends
What are the 5 classifications of general ledgure accounts?
assets, liabilities, equity, revenue and expense
Revenues total $10,200. Expenses total $7,300. Dividends declared and paid total $2,600. What is the balance in the revenues account after closing the temporary accounts to retained earnings account?
balance of $0
which financial statement shows that a company resources equal claim to their resources?
balance sheet
Which of the following journal entries would be recorded if a business received cash of $600 on account for services performed at an earlier date?
cash - 600 accounts receivable - 600
which of the following accounts would appear in the credit column of a trial balance?
common stock
what is the equation for book value?
cost of equipment + less accumulative depreciation = book value
debits need to always equal what?
credits
What does a net loss do?
decreases retained earnings
A code or moral system that provides criteria for evaluating right and wrong is referred to as?
ethics
What represent's a company's primary means of communicating information to external users?
financial statements
where are all transactions recorded?
in a journal
what does debit mean?
left side
Which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?
neutrality
what does on account mean?
no cash is involved
How does the statement of cash flows classify items?
operating, investing and financing
Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when?
paid
Which of the following accounts is increased with a debit?
prepaid expense
which of the following accounts would be debited when a company pays $12000 in advance for one year of rent?
prepaid rent
The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of?
relevance and faithful representation.
which accounts are not on the final trial balance?
revenue, expenses, and dividends
what are amounts earned from the sale of products or services referred to as?
revenues
Under cash-basis accounting what applies?
revenues are recorded when cash is received. expenses are recorded when cash is paid.
Which accounts appear on the income statement?
revenues, expenses
What is the purpose of an income statement?
summarize the profit-generating activities that occurred during a particular reporting period
Management discussion and analysis and note disclosures to the financial statements are included on what?
the annual report
Which of the following financial statements illustrates the fundamental accounting equation?
the balance sheet
Information that best explains companies' stock price performance is reported on what?
the income statement
which of the following is used to provide a chronological record of all transactions affecting a firm?
the journal
After initially recording a transaction, the data are then copied or posted to which of the following?
the ledger
When a company earns net income what happens to its retained earnings?
they increase