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ACC 201
ALL CHAPTERS (accumulative)
| Question | Answer |
|---|---|
| Interest on a note payable is interest that will be paid. therefore , it is an ___________. Interest revenue results from notes receivable or investments that earn interest. | expense |
| a liability account, such as Unearned Revenue, will be increased since the company has an obligation to fulfill. ___________ is recorded later when the sale is fulfilled or the service is performed. | Revenue |
| Accounts receivable | Balance sheet, debit |
| accounts payable | balance sheet, credit |
| service revenue | income statement, credit |
| cash | balance sheet, debit |
| contributed capital | balance sheet, credit |
| dividends | balance sheet debit |
| sales revenue | income statement, credit |
| inventory | balance sheet, debit |
| interest revenue | income statement, credit |
| land | balance sheet, debit |
| maintenance expense | income statement, debit |
| notes payable | balance sheet, credit |
| prepaid legal fees | balance sheet, debit |
| rent expense | income statement, debit |
| rent revenue | income statement, credit |
| wages expense | income statement, debit |
| building | balance sheet, debit |
| unearned subscription revenue | balance sheet, credit |
| utilities expense | income statement, debit |
| income taxes payable | balance sheet, credit |
| hired an officer manager at $3,500 per month. The officer manager will start work on Feb. 1 | NJE |
| Paid workers $8300 for work done in January. | dr. salary expense $8300 cr. cash $8300 |
| Provided $26,000 of services. $17,000 was received in cash and $9000 was provided on credit. | dr. cash $17,000 dr. accounts receivable $9,000 cr. service revenue $26,000 |
| bought $15,000 of new equipment, signing a promissory note | dr. equipment $15,000 cr. note payable $15,000 |
| bought $423 of supplies for cash | dr. supplies $423 cr. cash $423 |
| paid $3,500 legal fees in advance for legal services to be received over the next six months | dr. prepaid legal fees $3,500 cr. cash $3,500 |
| paid $689 on account for decembers utilities | dr. accounts payable $689 dr. cash $689 |
| Net income | is the amount by which revenues exceed expenses |
| expenses | on the income statement in the time period in which they are incurred |
| separate entity assumption | a company's financial statements reflect only the business activities of that company and no other entity. |
| three main types of business activities | operating, investing, and financing |
| assets | represent the resources owned by a company |
| 3 basic elements of balance sheet | assets, liabilities, and stockholders' equity |
| True or False ---(liabilities-stockholders equity)=assets | False. |
| if XYZ company had $12 million in revenue and net income of $3 million, then its expenses are | $9 million |
| ABC company sold $11 million games in the 1st year of operations. company received payments of $7.5 million for these games. Companys income statement would report | sales revenue of $11 million |
| During 2013, a company's assets increase by $56,000 and its liabilities increase by $38,000. If no dividends is paid and no further capital is contributed, net income for 2013 was | $18,000 |
| True or False (any item on a balance sheet labeled payable is a liability of that company) | True |
| which one of the following is a long lived asset? a.accounts receivable b.cash c. supplies d.buildings | d. buildings |
| True or False (a long-term liability is one that the company will not pay off for over one year) | True |
| Which of the following is NOT an example of an asset? a.retained earnings b.notes receivable c.supplies d.prepaid expensees | a. retained earnings |
| (classification) and (normal balance) of retained earnings account | stockholders equity; credit |
| True or False (debits reduce expenses) | False. credits increase revenues |
| costs of items used up this period but paid for next period is an example of what? | Expense of this period. |
| the income statement shows the effects of the transactions in june | During June, the XYX company mows 100 lawns/week & is paid in JULY by customers. company uses accrual base acct. How do these events affect companys financial statements? |
| (T/F) your company receives advance payment in october for services that are provided during november so a liability is recorded in october; in november the liability is reduced and revenue is recorded | TRUE. liability is recorded in october; in november the liability is reduced and revenue is recorded |
| ur company orders & receives supplies in JAN, pays for them in FEB., provides services that use goods up in MAR, and is paid by customers in april. Using accrual basis of accounting. When are expenses are revenue recorded? | expenses and revenues are recorded in march. |
| insurance expired for the month of december | dr. insurance expense cr. prepaid insurance |
| after a count, supplies on hand totaled $1020 | dr. supplies expense cr. supplies |
| depreciation on the office equipment for december $3321 | dr. depreciation expense cr. accumulated depreciation |
| accrued receptionist salary on dec 31 $190 | dr. salaries expense cr. salaries payable |
| rent expired for the month of december | dr. rent expense cr. prepaid rent |
| 1/3 of the unearned service revenue was earned by dec 31 | dr. unearned revenue cr service revenue |
| paid 3 months rent on a lease rental contract $4,500 | dr. prepaid rent cr cash |
| paid the premium on property and casualty insurance policies for the year $1,800 | dr. prepaid insurance cr cash |
| received cash from clients as payment for services to be provided next year $3000 | dr. cash cr unearned revenue |
| purchased additional office furniture on account from abc company | dr office furniture cr accounts payable |
| received cash from clients that received services on account | dr cash cr accounts receivable |
| paid cash for newspaper advertisement | dr advertising expense cr cash |
| paid morrilton company 800 for debt incurred on dec 7 | dr accounts payable cr cash |
| recorded services provided on account for the period dec 4-15 $5000 | dr accounts receivable cr service revenue |
| paid part time receptionist two weeks salary 950 | dr salaries expense cr cash |
| recorded cash payment for services provided to clients 5025 | dr cash cr service revenue |
| paid cash for supplies 750 | dr supplies cr cash |
| recorded services provided on account for dec 18-22 $2100 | dr accounts receivable cr service revenue |
| received cash from clients on account | dr cash cr accounts receivable |
| paid part time receptionist two weeks salary | dr salaries expense cr cash |
| paid telephone and electric bills for december | dr utilities expense cr cash |
| recorded cash payment for services provided to clients | dr cash cr service revenue |
| ceo received 4500 from the company as his salary | dr salaries expense cr cash |
| temporary (nominal) accounts | revenues and expenses on the income statement |
| permanent accounts (real) accounts | assets, liabilities, equity on the balance sheet |
| T/F Retained earnings is the only permanent account affected by closing entries | True |
| What comes next after closing entries? | Post closing trial balance |
| _________ are needed to ensure that assets, liabilities, revenues, and expenses are reported at the appropriate amounts and in the proper period. | ADJUSTMENTS |
| cash has been paid, but the expense has not been incurred | deferred expense (asset) |
| involves an asset account and an expense account | deferred expense (asset) |
| allocates a portion of an asset to an expense | deferred expense (asset) |
| cash has been received, but the revenue has not been earned | deferred revenue (liability) |
| involves a revenue account and a liability account | deferred revenue (liability) |
| recognize revenues that have been earned or expenses that have been incurred but not yet recorded | accrual adjustments |
| revenue has been earned, but cash has not been received | accrued revenue (asset) |
| will debit an asset (receivable) and credit a revenue | accrued revenue (asset) |
| liability and expense | salaries payable and salaries expense |
| asset and revenue | interest receivable and interest revenue |
| expense has been incurred, but cash has not been paid | accrued expense (liability) |
| will always debit an expense and credit a liability (payable) | accrued expense (liability) |
| Jackson has earned interest of $1000 | dr interest receivable cr interest revenue |
| jackson owed the bank $2500 in unpaid interest | dr. interest expense cr. interest payable |
| to check that the accounting records are still in balance | adjusted trial balance |
| shows the balance of all accounts at the end of the accounting period | adjusted trial balance |
| used to prepare the financial statements | adjusted trial balance |
| What are the easiest entries to make? | Closing Entries |
| What are the hardest entries to make? | Adjusting Entries |
| company owes interest of 700 on bank loan, interest will be paid when the loan is repaid. no interest has been recorded | dr interest expense cr interest payable |
| jordan collected six months rent on storage space. then jordan debited cash and credited unearned revenue | dr unearned revenue cr rent revenue |
| the company earned service revenue on a special job that was completed. the collection will be made during later on. no entry has been recorded. | dr accounts receivable cr service revenue |
| carl paid a one year premium for property insurance that started today. the cash was credited and prepaid insurance was debited for this amount. | dr insurance expense cr prepaid insurance |
| wages earned by employees but not yet paid totaled an amount. employees will be paid on the next payroll date. | dr wage expense cr wages payable |
| depreciation must be recognized on a service truck purchased this year | dr depreciation expense cr accumulated depreciation |
| company received a tax bill from the city for property taxes on land. the tax bill is payable later on. | dr property tax expense cr property tax payable |
| income before any of the adjustments or income taxes was 27,400. income tax rate 30 percent. compute adjusted income. determine income tax expense. | dr income tax expense cr income tax payable |
| two year insurance premium on equipment was paid and debited in full to prepaid insurance. coverage began today. | dr insurance expense cr prepaid insurance |
| unadjusted balance in officie supplies is blah blah blah. physical count on supplies indicated supplies were still on hand. | dr. supplies expense cr. supplies |
| carl completed repairs on brians truck. amount not recorded. it will be paid later on. | dr. maintenance expense cr. maintenance payable |
| property tax bill was received from city. taxes have not been recorded, will be paid later on | dr property tax expense cr property tax payable |
| brian and chaz completed a contract for an out of state company. payable by the customer within 30 days. no cash has been collected. no journal entry has been made. | dr accounts receivable cr service revenue |
| chaz purchased a new turbo charged car depreciation has not been recorded | dr depreciation expense cr accumulated depreciation |
| brian owes interest on a bank loan taken out yesterday. interest will be paid when the loan is repaid tomorrow. no interest has been recorded yet. | dr interest expense cr interest payable |
| dr expense cr cash | cash at the same time as expense |
| dr accounts payable cr cash | cash paid after expense is incurred |
| dr expense cr accounts payable | cash paid after expense is incurred |
| dr cash cr unearned revenue | cash received before revenue is earned |
| dr unearned revenue cr revenue | cash received before revenue is earned |
| dr cash cr revenue | cash at the same time as revenue |
| dr cash cr accounts receivable | cash received after revenue is earned |
| dr accounts receivable cr revenue | cash received after revenue is earned |
| dr prepaid cr cash | cash paid before expense is incurred |
| dr expense cr prepaid | cash paid before expense is incurred |
| What are the 9 words to remember when constructing a balance sheet? | Assets,current assets,total current assets, total assets, current liabilities, total current liabilities, total liabilities, total stockholders equity, total liabilities and stock holders equity |
| adjusted trial balance | a list of all accounts and their adjusted balances to check on the equality of recorded debits and credits |
| adjusting journal entries | entries necessary at the end of each accounting period to measure all revenues and expenses of that period |
| adjustments | made to the accounting records at the end of the period to ensure assets and liabilities are reported at appropriate amounts. |
| Net Book Value (book value, carrying value) | the amount at which an asset or liability is reported after deducting any contra accounts |
| contra account | an account that is an offset to, or reduction of, another account |
| depreciation | process of allocating the cost of building and equipment over their productive lives using a systematic and rational method of allocation |
| permanent accounts | the balance sheet accounts that carry their ending balances into the next accounting period |
| post closing trial balance | prepared as the last step in the accounting cycle to check that debits equal credits and that all temporary accounts have been closed |
| temporary accounts | income statement accounts that are closed to retained earnings at the end of the accounting period |
| accrued liabilities | previously unrecorded expenses that need to be adjusted at the end of the accounting period to reflect the amount incurred and its related liability account |
| accrued revenues | previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and its related receivable account |
| deferred expenses | previously acquired assets that need to be adjusted at the end of the accounting period to reflect the amount of expense incurred in using the asset to generate revenue |
| deferred revenues | previously recorded liabilities that need to be adjusted at the end of the period to reflect the amount of revenue earned |
| expenses | decrease in assets or increases in liabilities from ongoing operations, incurred to generate revenues during the current period |
| investing activities | involve buying or selling long lived items such as land, buildings and equipment |
| long lived assets | tangible and intangible resources owned by a business and used in its operations over several years |
| long term assets | resources that will be used up or turned into cash more than 12 months after the balance sheet date |
| long term liabilities | all of the entity's obligations that are not classified as current liabilities |
| prepaid expenses | a general account name used to describe payments made in advance of receiving future services; typically includes prepaid rent, prepaid insurance, and other specific types of prepayments |
| statement of retained earnings | reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period |
| t account | a simplified version of a ledger account used for summarizing transaction effects and determining balances for each account |
| time period assumption | the assumption that allows the long life of a company to be reported in shorter time periods |
| current asset | assets that will be used up or turned into cash within 12 months or the next operating cycle, whichever is longer |
| current liability | short term obligations that will be paid in cash ( or fulfilled with other current assets ) within 12 months or the next operating cycle, whichever is longer. |
| ____________ is a generic account name that can include liabilities recorded using accrual adjustments for salaries, utilities, income taxes, and many other items. | accrued liabilities |
| when determining each adjustment, draw timelines to picture where we are now, where we need to be and the _____________ to get us there | adjustment |
| __________ is never part of an accrual or deferral adjustment | cash |
| the ____________ is the temporary home for revenue and expense accounts, and their permanent home is retained earnings in the stockholders' equity section of the balance sheet | income statement |
| ___________ are not expenses, but rather are distributions to stockholders of the company's prior profits that have accumulated in retained earning | dividends |
| the _________ balance from the statement of retained earnings is reported on the balance sheet | ending |
| each _________ journal entry affects one balance sheet and one income statement account | adjusting |
| credit the ______________ account for the amount of its balance and debit retained earnings for the same amount | dividends declared |
| _______________ help ensure all revenues and expenses are reported in the period in which they are earned and incurred, as a result of a company's activities | adjustments |
| when a concert promotions company collects cash for ticket sales two months in advance of the show date, which of the following accounts is recorded? | unearned revenue |
| after adjustments been completed the balance in"wages expense" account represents A) wages that have been incurred but not yet paid at the end of the accounting period or B) total wages, paid & unpaid that have been incurred during the accounting period | B) total wages, paid and unpaid, that have been incurred during the accounting period |
| sales discounts should appear in the financial statements as | deduction from sales |
| the gross profit percentage measures the percentage of profit earned on each dollar of sales before deducting all expenses other than cost of goods sold. This ratio is used to | compare one company with another and make comparisons over time |
| xyz company sold merchandise for 5000 with payment terms of 2/10,n/30. if the customer pays within the discount period and takes the discount, xyz will receive.. | 4900 |
| create income statement in the proper order | sales revenue, sales discounts, nets sales, cost of goods sold, gross profit |
| under the __________ inventory system, the inventory account is updated every time inventory is bought, sold, or returned | perpetual |
| company uses perpetual invent. system. bookkeeper recorded 5000 sale on account, forgot to record related cost of goods sold for 3000. as result of this error... | total assets will be too high and net income will be too high |
| which inventory system updates the inventory account ONLY at the end of the accounting period? | Periodic |
| what does FOB destination mean? | goods are owned by the buyer as soon as they arrive at the buyers place of business |
| which of the following are reasons for maintaining inventory accounting systems? | to assist management in setting appropriate selling prices, to control inventory levels, to determine gross profit |
| XYZ company sold merch for 5000 w/ payment terms of 2/10,n/30. if the customer pays within the discount period and takes the discount, xyz will receive... | 4900 |
| Perpetual inventory system | after inventory is sold, its cost is removed from the balance sheet and reported on the income statement as an expense |
| perpetual inventory system | until inventory is sold, it is an asset reported at its cost on the balance sheet |
| sales discounts should appear in the financial statements as | deduction from sales |
| if the customer returned the product, acme would also record a debit to inventory and a credit to ___________________. | cost of goods sold |
| under the ______ inventory system, the inventory account is updated everytime inventory is bought, sold or returned | perpetual |
| bank reconciliation | process of using both the bank statement and the cash accounts of a business to determine the appropriate amount of cash in a bank account, after taking into consideration delays or errors in processing cash transactions. |
| cash | Money or any instrument that banks will accept for deposit and immediate credit to the company's account, such as a check, money order, or bank draft. |
| cash equivalents | short-term, highly liquid investments purchased within three months of maturity. |
| FOB destination | term of sale indicating that goods are owned by the seller until delivered to the customer. |
| FOB Shipping Point | term of sale indicating that goods are owned by the customer the moment they leave the seller's premises. |
| Gross Profit (or gross margin) | net sales less cost of goods sold |
| gross profit percentage | indicates how much above cost a company sells its products; calculated as gross profit divided by net sales |
| imprest system | a process that controls the amount paid to others by limiting the total amount of money available for making payments to others |
| internal controls | processes by which a company provides reasonable assurance regarding the reliability of the company's financial reporting, the effectiveness and efficiency of its operation, and its compliance with applicable laws and regulations |
| manufacturing company | a company that sells goods that it has made itself |
| merchandising company | a company that sells goods which have been obtained from a supplier |
| multistep income statement | reports alternative measures of income by calculating subtotals for core and peripheral business activities |
| NSF (Not Sufficient Funds) Check | checks written for an amount greater than the funds available to cover them |
| Periodic Inventory System | a system in which ending inventory and cost of goods sold are determined only at the end of the accounting period based on a physical inventory count |
| Perpetual Inventory System | a system in which a detailed inventory record is maintained by recording each purchase and sale of inventory during the accounting period |
| Sales Discount | cash discount offered to customers to encourage prompt payment of an account receivable |
| Sales Returns and Allowances | reduction of sales revenues for return of or allowances for unsatisfactory goods |
| Segregation of Duties | an internal control that involves separating employees' duties so that the work of one person can be used to check the work of another person |
| Service Company | a company that sells services rather than physical goods |
| Shrinkage | the cost of inventory lost to theft, fraud, and error |
| Voucher System | a process for approving and documenting all purchases and payments on account |
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