Accounting Review Pre-CORE

Question 1

What is the accounting equation?

Answer 1

Assets=liabilities + Shareholder’s Equation

Question 2

What is the definition of an asset?

Answer 2

Probable future economic benefit. Lemons for stand.

Question 3

Where are assets found?

Answer 3

On the balance sheet

Question 4

Assets we will use within one year

Answer 4

Current assets. Lemons, sugar, water.

Question 5

Assets we will use or hold longer then 1 year

Answer 5

Long term assets. Lemonade stand.

Question 6

Accounts receivable (A/R) results from:

Answer 6

sales on credit. Person promising to pay me back tomorrow for cup of lemonade.

Question 7

What three things are included in inventory?

Answer 7

Raw materials, work in progress, and finished goods.

Lemons, pitcher with water in it, but no sugar, and a pitcher of lemonade.

Question 8

What are the four types of assets?

Answer 8

Cash, Accounts Receivable (A/R), Inventory, and Building

Cash, money owed for lemonade, lemons, sugar, cups, Ince, water, lemonade stand

Question 9

What are the two options for recording costs?

Answer 9

Assets and expenses

Question 10

What is the difference between an asset and an expense?

Answer 10

Assets will benefit in the future (lemonade stand) while expenses benefit us in the present (rent to mean old lady whose house our lemonade stand sits in front of)

Question 11

Expenses are recorded where?

Answer 11

Income Statement

Question 12

Assets are recorded where?

Answer 12

Balance sheet

Question 13

Do assets reduce net income?

Answer 13

Net income is not reduced

Question 14

What is the formula for net income?

Answer 14

revenue-expenses=net income

Question 15

Why do all assets either become cash or an expense?

Answer 15

Assets are sold off for revenue or they are used to generate revenue

Question 16

What question must we ask ourselves to determine if inventory will move from an asset to an expense?

Answer 16

Is the cost incurred benefitting our company in the future or in this period?

Question 17

Inventory is initially recorded as:

Answer 17

an asset

Question 18

When is inventory recorded as an expense?

Answer 18

Moved to COGS when inventory is sold and revenue is recorded

Question 19

How do you calculate gross profit?

Answer 19

Revenue-COGS=Gross profit

Question 20

Under what circumstances would the assets of our lemonade stand become an expense?

Answer 20

Though initially recorded as an asset, the building/lemonade stand would become an expense as the value of the stand depreciates

Question 21

When do we record expenses?

Answer 21

Expenses are recorded in the same period as they help us to generate revenue.

Question 22

When depreciation expenses occur what happens to the assets and expenses accounts?

Answer 22

The assets account is decreased and the expense account is increased

Question 23

What is a book value?

Answer 23

the value of a building at the end of the year (after the depreciation of the building)

Question 24

What is the formula for net income?

Answer 24

Revenue-expenses