FINANCIAL ACCOUNTING FINAL REVIEW
At December 31, 2016 Keen Company had retained earnings of $1,292,000. During 2016 they issued stock for $49,000, and paid dividends of $17,000. Net income for 2016 was $201,000. The retained earnings balance at the beginning of 2016 was..?
$1,108,000
Gilkey Corp. began the year with retained earnings of $465,000. During the year, the company issued $630,000 of common stock, recorded expenses of $1,800,000, and paid dividends of $120,000. If Gilkey's ending retained earnings was $495,000, what was the company's revenue for the year?
$1,950,000
In the first month of operations, the total of the debit entries to the Cash account amounted to $1,200, and the total of the credit entries to the Cash account amounted to $900. The Cash Account has a
$300 debit balance
If total liabilities decreased by $75,000 and stockholders' equity increased by $25,000 during a period of time, the total assets must change by what amount and direction during that same period?
$50,000 decrease
Pinson Company began the year with retained earnings of $570,000. During the year, the company recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What was Pinson's retained earnings at the end of the year?
$650,000
What are the generally accepted accounting principles? (GAAP)
Accounting rules that are recognized as a general guide for financial reporting
What are Operating activities?
Actually running the business
An accountant has debited as asset account for $900 and credited a liability account for $600. What can be done to complete the recording of the transaction?
Credit a different asset account for $300
In a Classified Balance Sheet, what four things are listed under Assets?
Current assets, Long-term investments, PPE, and Intangibles
What is the Accounting Equation?
Assets=Liabilities+Stockholders' Equity
In a Classified Balance Sheet, what if listed under Liabilities?
Current liabilities, and Long-term liabilities
Define Normal Balance?
Balance that should be in that specific account
What is on the Retained Earnings Statement?
Beginning retained earnings, net income, dividends, and ending retained earnings
Which principle says that expenses should be recorded with revenues?
Expense recognition priniciple
What are the three types of business activities?
Financing, Investing, and Operating
What are Investing activities?
Resources to operate the business
What is on the Income Statement?
Revenues, expenses and net income or loss
What is the primary difference between prepaid and accrued expenses?
Prepaid expenses have been recorded and accrued expenses have not.
Different companies using the same accounting principles in an application of
comparability
A company using the same accounting principles from year to year is an application of
consistency
An adjusting entry affects which financial statement(s)?
balance sheet and income statement
If a company buys a $700 machine on credit, the transaction will affect the
balance sheet only
Accounting is the information system that _____, _________, and ________the economic events of an organization to interested users.
identifies, records and communicates
The double-entry system requires that each transaction must be recorded
in two different accounts
Dividends appear on which financial statement(s)?
retained earnings statement
What is the primary purpose of a trial balance?
to prove equality of the debit and credit amounts after posting
Collection of a $600 AR increases what and decreases what?
increases an asset by $600 and decrease an asset $600
The purpose of the ledger is too?
keep in one place all info about changes in specific account balances
The Unearned Service Revenue account is classified as a(n)
liability
Jimmy's Repaid Shop started the year with total assets of $200,000 and total liabilities of $160,000. During the year the business recorded $420,000 in revenues, $220,000 in expenses, and dividends of $40,000. Stockholders' equity at the end of they year was..?
$200,000
What is an advantage of using the multiple-step income statement?
It highlights the components of net income
What is the beginning retained earnings for a new company?
0
What is internal control?
A plan that safeguards assets
What is the expanded basic accounting equation?
Assets+dividends+expenses=Liabilities+CS+revenues
What is on the Balance Sheet?
Assets, Liabilities and stock holders equity
What does ADE stand for?
Assets, dividends and expenses
What are the 9 steps of the recording process?
Analyze, journalize, post, trial balance, adjusting entries, adjusted trial balance, financial statements, closing entries and closing trial balance
Define Current Assets.
Assets that convert to cash or can be used up within 1 year of balance sheet date
What are Intangibles?
Assets that do not have physical substance
Define PPE.
Assets with long useful lives, being used
A journal provides what?
Chronological record of transactions
what is it called when two or more people come together for the purpose of circumventing prescribed controls?
Collusion
In a Classified Balance Sheet, what is listed under Stockholders' Equity?
Common stock and Retained earnings
The difference between sales revenue and cost of goods sold is what?
Gross profit
What does the custodian of a company asset do?
Holds on to the asset
What are the two groups of users?
Internal and External
Define a Long-Term investment?
Investments held longer than 1 year
Types of external users?
Investors, board of directors, creditors and customers
Types of internal users?
Managers, Supervisors and employees
Why do accounts need to be adjusted?
Many transactions affect more than one time period
What are Financing activities?
Money to run the business
Net income will result if gross profit exceeds what?
Operating expenses
What is on the Statement of Cash Flows?
Operating, Investing and financing activities
What is PPE?
Property, Plant and Equipment
What are the two fundamental qualities of useful information?
Relevance and faithful reprensentation
The right side of an account is the
The credit side
The left side of an account is
The debit side
What is book value?
The difference between the balance of a piece of equipment and its accumulated depreciation
An account consists of what?
Title, debit side and credit side
What is the primary difference between accrued revenues and unearned revenues?
Unearned revenues have been recorded and accrued revenues have not
When does the cash basis of accounting say revenue should be recognized?
When cash is received
When does the revenue recognition principle say that revenue should be recognized?
When the service has been performed
Merchandising companies that sell to retailers are known as what?
Wholesalers
The usual sequence of steps in the transaction recording process are?
analyze, journalize, post
Powers Corp. received a cash advance of $500 from a customer. As a result of this event,
assets increased by $500
If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck, them
assets will be increased by $40,000
Equipment costing $20,000 is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a
credit to Notes Payable
The historical cost principle requires that when assets are acquired, they be recorded at
the amount paid for them
