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accounting

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information and measurement systems that identifies, records, communicates relevant, reliable, information about a businesses activies

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primary objective of financial accounting

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provide accounting information that serves external users

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independent group that is attempting to harmonize accounting practices of different countreis

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IASB

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rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold

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objectivity principle

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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

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cost principle

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the question of revenue should be recognized on the income statement according to GAAP is addressed by the

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revenue recognition assumption

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accounting principle that a company records its expenses incurred to generate the revenue reported

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matching principle

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net income

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excess of revenues over expenses

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resources a company owns or controls that are expected to yield future benefits are

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assets

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if liabilities are increased 75,000$ and stockholders equity in business decreased 30000$, the assets must have

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increaed 45,000

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assets=

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liabilities + assets

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rent expense is on:

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income statements

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basic financial statements include all of the following but

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statement of changes in assets

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statement of retained earnings

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reports how retained earnings changes over a period of time

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financial statement that reports whether the business earned a profit and also lets revenue and expenses

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income statement

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balance sheet lists

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amounts of assets, liabilities, and equity of a business

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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

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balance sheet

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financial statement that identifies a companys cash reciepts and payments

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statement of cash flows

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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

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statement of retained earnings

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accounts payable appears on which of the following

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balance sheet

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income statement reports all except

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assets owned by a business

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if assets increased 89,000 during a period of time and liabilities increased 67,000.. equity in business must have

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increased 22,000

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if the company paid 38,000 of its accounts payable in cash, what was the effect on the accounting equation

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assets would decrease 38,000 ; liabilities would decrease 38,000

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increases in equity from a companys sales of products or services are

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revenues

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ceridtors clains on the assets of a company

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liabilities

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decreases in equity that represent costs of providing products or services to customers, used to earn revenue

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expenses

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distributions of cash or other resources by a business to its stockholders are called:

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dividends

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equity=300,000 liabilites=192,000 assets=?

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492,000

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what is not an asset: supplies, accounts recievable, land, equipment, accounts payable

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accounts payable

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which is not included in the calculations of a companys ending stockholders equity

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cash

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rent expense appears on

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income statement

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companys list of accounts and identification numbers assigned to each account is

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chart of accounts

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numbering system used in a compacts chart of accounts

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typically begins with balance sheet accounts

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a businesses source documents

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provide objective evidence that a transaction has taken place

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a businesss source documents may include all but: checks, bank statements, ledgers, purchase orders, sales tickets

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ledgers

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account used to record the stockholders investments in a business

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common stock account

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record of all accounts and their balances used by a business

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ledger

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a debit

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left-handed side of the T-account

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credit is used to record an increase in all of the following except: unearned revenue, common stock, accounts payable, service revenue, wages expense

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wages expense

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account that is classified as a liability in a companys chart of accounts

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unearned revenue

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simple tool used in accounting to represent a ledger account and understand how debits and credits affect account balances

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T-account

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credit entry:

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decreases asset and expense accounts, increases liability, stockholders equity, and revenue accounts

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a double-entry accounting system is an accounting system

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that records the effects of transactions and other events in at least two accounts with equal debits and credits

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willow rentals purchased office supplies on credit. the general journal entry made by willow rentals will include:

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credit to accounts payable

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If a company received 800$ cash that would be given to them next month, how would they make this reaction

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debit cash: 800 credit unearned catering revenue: 800

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an asset created by prepayment of an insurance expense

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recorded as a debit to prepaid insurance

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debit is used to record a INCREASE in all but: prepaid insurance, supplies, dividends, cash ,accounts payable

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accounts payable

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right side of a T- account

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credit

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this is an incorrect statement

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normal balance of an expense is a credit

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unearned revenues are generally:

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liabilities created when a customer pays in advance for products or services before the revenue is earned

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prepaid expenses are generally:

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assets the represent prepaymetns of future expenses

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another name for a temporary account

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nominal account

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assets, liabilities, and equity accounts are not closed; these accounts are

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permanent accounts

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the closing process is necessary in order to

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ensure that the net income or net loss and dividends for the period are closed into retained earnings account

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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

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accounting cycle

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final step in accounting cycle

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preparing a post-closing trial balance

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classified balance sheet

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organizes assets nd liabilities into important subgroups that provide more information

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account used in the closing process to temporarily hold the amounts of revenues before different is added to retained earnings

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income summary account

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income summary account is used to

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close the revenue and expense accounts

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adjusting enteries

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affects both income statement and balance sheet accounts

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approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is

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accrual basis accounting

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prepaid expenses, depreciation, accrued expenses, unearned earning are all

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items that require adjusting entries

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account linked with another account that has an opposite normal balance and is subtracted from the balance of a related account

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contra account

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total amount of depreciation recorded against an asset over the entire time the asset has been owned

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accumulated depreciation

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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

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debit unearned legal fees and credit legal fees earned

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incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are

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accrued expenses

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difference between the cost of an asset and the accumulated depreciation for that asset is called

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book value

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the adjusting trial balance contains information pertaining to

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all general ledger accounts

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assuming unearned revenue are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is

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decrease a liability; increase revenue

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when closing entries are made

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all temporary accounts are closed but permanent accounts are not closed

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this is a real/permanent account

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accounts payable

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financial statements are typically prepared in the following order

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income statements, statement of retained earnings, balance sheet

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adjusting entry to record an accord revenue is

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increase an asset; increase revenue

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