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accounting 1

accounting
information and measurement systems that identifies, records, communicates relevant, reliable, information about a businesses activies
primary objective of financial accounting
provide accounting information that serves external users
independent group that is attempting to harmonize accounting practices of different countreis
IASB
rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold
objectivity principle
accounting principle that requires information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange
cost principle
the question of revenue should be recognized on the income statement according to GAAP is addressed by the
revenue recognition assumption
accounting principle that a company records its expenses incurred to generate the revenue reported
matching principle
net income
excess of revenues over expenses
resources a company owns or controls that are expected to yield future benefits are
assets
if liabilities are increased 75,000$ and stockholders equity in business decreased 30000$, the assets must have
increaed 45,000
assets=
liabilities + assets
rent expense is on:
income statements
basic financial statements include all of the following but
statement of changes in assets
statement of retained earnings
reports how retained earnings changes over a period of time
financial statement that reports whether the business earned a profit and also lets revenue and expenses
income statement
balance sheet lists
amounts of assets, liabilities, and equity of a business
financial statement providing information that helps users understand a company’s financial status, and which lists the types and amounts of assets, liabilities, and equity
balance sheet
financial statement that identifies a companys cash reciepts and payments
statement of cash flows
financial statement that shows the beginning balance of retained earnings; the changes in retained earnings that resulted from, net income;divendeds; and the ending balance
statement of retained earnings
accounts payable appears on which of the following
balance sheet
income statement reports all except
assets owned by a business
#22… detemine equity
detemine net income… #23
if assets increased 89,000 during a period of time and liabilities increased 67,000.. equity in business must have
increased 22,000
if the company paid 38,000 of its accounts payable in cash, what was the effect on the accounting equation
assets would decrease 38,000 & liabilities would decrease 38,000
increases in equity from a companys sales of products or services are
revenues
ceridtors clains on the assets of a company
liabilities
decreases in equity that represent costs of providing products or services to customers, used to earn revenue
expenses
distributions of cash or other resources by a business to its stockholders are called:
dividends
#31
equity=300,000
liabilites=192,000
assets=?
492,000
what is not an asset: supplies, accounts recievable, land, equipment, accounts payable
accounts payable
which is not included in the calculations of a companys ending stockholders equity
cash
rent expense appears on
income statement
companys list of accounts and identification numbers assigned to each account is
chart of accounts
numbering system used in a compacts chart of accounts
typically begins with balance sheet accounts
a businesses source documents
provide objective evidence that a transaction has taken place
a businesss source documents may include all but: checks, bank statements, ledgers, purchase orders, sales tickets
ledgers
account used to record the stockholders investments in a business
common stock account
record of all accounts and their balances used by a business
ledger
a debit
left-handed side of the T-account
credit is used to record an increase in all of the following except: unearned revenue, common stock, accounts payable, service revenue, wages expense
wages expense
account that is classified as a liability in a companys chart of accounts
unearned revenue
simple tool used in accounting to represent a ledger account and understand how debits and credits affect account balances
T-account
credit entry:
decreases asset and expense accounts, increases liability, stockholders equity, and revenue accounts
a double-entry accounting system is an accounting system
that records the effects of transactions and other events in at least two accounts with equal debits and credits
willow rentals purchased office supplies on credit. the general journal entry made by willow rentals will include:
credit to accounts payable
If a company received 800$ cash that would be given to them next month, how would they make this reaction
debit cash: 800
credit unearned catering revenue: 800
an asset created by prepayment of an insurance expense
recorded as a debit to prepaid insurance
debit is used to record a INCREASE in all but: prepaid insurance, supplies, dividends, cash ,accounts payable
accounts payable
right side of a T- account
credit
this is an incorrect statement
normal balance of an expense is a credit
unearned revenues are generally:
liabilities created when a customer pays in advance for products or services before the revenue is earned
prepaid expenses are generally:
assets the represent prepaymetns of future expenses
another name for a temporary account
nominal account
assets, liabilities, and equity accounts are not closed; these accounts are
permanent accounts
the closing process is necessary in order to
ensure that the net income or net loss and dividends for the period are closed into retained earnings account
the recurring steps performed each reporting period in preparing financial statements, starting with analyzing and recording transactions in the journal and continuing through post trial balance
accounting cycle
final step in accounting cycle
preparing a post-closing trial balance
classified balance sheet
organizes assets nd liabilities into important subgroups that provide more information
account used in the closing process to temporarily hold the amounts of revenues before different is added to retained earnings
income summary account
income summary account is used to
close the revenue and expense accounts
adjusting enteries
affects both income statement and balance sheet accounts
approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is
accrual basis accounting
prepaid expenses, depreciation, accrued expenses, unearned earning are all
items that require adjusting entries
account linked with another account that has an opposite normal balance and is subtracted from the balance of a related account
contra account
total amount of depreciation recorded against an asset over the entire time the asset has been owned
accumulated depreciation
if throughout the accounting period the fees for legal services are paid in advance are recorded in an account called unearned legal fees, the end of the period adjusting entry to record the portion of those fees that has been earned is
debit unearned legal fees and credit legal fees earned
incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are
accrued expenses
difference between the cost of an asset and the accumulated depreciation for that asset is called
book value
the adjusting trial balance contains information pertaining to
all general ledger accounts
assuming unearned revenue are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is
decrease a liability; increase revenue
when closing entries are made
all temporary accounts are closed but permanent accounts are not closed
this is a real/permanent account
accounts payable
financial statements are typically prepared in the following order
income statements, statement of retained earnings, balance sheet
adjusting entry to record an accord revenue is
increase an asset; increase revenue

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