Accounting test 1 Flashcards
Expanded Accounting Equation
A= L+[(Owner’s capital - Owner’s equity)] + (Revenue-Expenses)]
How many main accounts of the business are there?
6
-liability
- owner’s capital
- Owner’s equity
- revenue
- expenses
- assets
Revenue from providing services is recorded as
fees earned
Revenue from sales of merchandise is recorded as
sales
rent and interest is recorded as
rent revenue
interest revenue
Double entry accounting system should affect ________________________-
AT LEAST 2 accounts
Prepaid expenses are _______ then become an _________
assets
expense
What increases Owner’s equity?
Owner’s investment and revenues
What decreases Owner’s equity?
Owner’s withdrawals and expenses
Financial statements
intended to be done at the end of the fiscal year or can be prepared for a few months (for a specific period of time)
4 financial statements
Income statement
A summary of the revenue and expenses and it shows the net income or loss for a period of time.
Miscellaneous expenses always come last
net income is carried to the statement of owner’s equity.
Statement of owner’s equity (statement of retained earnings)
A summary of the owner’s equity that have occurred during a specific period of time, such as a month or year.
sales and profit
proprietorships- Statement of owner’s equity
Corporation- statement of retained earnings
Balance sheet
Assets- fixed and current
Liabilities- Short term and long term
Owner’s equity
- particular point in time
A= L+ O.E
Statement of cash flows
A summary of the cash receipts and cash payments for a specific period of time.
- inflows and outflows of cash
3 activities/ sections
1. operating (affects: Rev & exp) [NL/NI]
2. investing (affects: fixed assets)
3. financing (affects: equity & debt)
Loans: interest is payed from ________
Principle is payed from ______
revenue (operating activity)
equity (financing activity)
