Accounting Test Flashcards
What are intangible assets?
Assets that do not have physical substance.
Examples include licenses, goodwill, trademarks, patents, and copyrights.
Define goodwill in accounting.
an intangible asset that accounts for the excess purchase price of another company
List examples of intangible assets.
- Licenses
- Goodwill
- Trademarks
- Patents
- Copyrights
What is the formula for straight-line depreciation?
SL Depr = (Cost - Salvage Value) / Useful Life
What does DR stand for in accounting entries?
Debit
What does CR stand for in accounting entries?
Credit
What is the purpose of adjusting entries?
To update the accounts before financial statements are prepared.
Fill in the blank: Unearned revenue is paid for a service you haven’t provided _______.
before year end
What is the journal entry for recognizing unearned revenue?
DR Unearned Revenue
CR Revenue
What is the current ratio formula?
Current Ratio = CA / CL
What are the components of a classified balance sheet?
Assets
* Current Assets
* Long-Term Investments
* Fixed Assets / Property, Plant & Equipment
* Intangible Assets
Liabilities
* Current Liabilities
* Long-Term Liabilities
Owner’s Equity
* Owner’s Name, Capital
What does the term ‘working capital’ refer to?
The difference between current assets and current liabilities.
What is the formula for the acid-test ratio?
Acid Test Ratio = (Cash + Short Term Investments + Receivables) / CL
What are the financial statements typically prepared?
- Income Statement
- Statement of Owner’s Equity
- Balance Sheet
What is the first step in the accounting cycle?
Analyze business transactions
True or False: Closing entries involve transferring net income to capital.
True
What is the purpose of reversing entries?
simplify recordkeeping and reduce the number of mistakes in the monthly accounting process.
Fill in the blank: Depreciation would not ______.
reverse
What are correcting entries used for?
To fix a prior error in journalizing.
What is the journal entry for accruing wages?
DR Wages / Salaries Expense
CR Wages / Salaries Payable
What is the journal entry for depreciation expense?
DR Depr. Exp. - ‘Thing’
CR Accumulated Depreciation - ‘Thing’
What are late arriving invoices?
Bills from suppliers that arrive after the accounting period in which the expense was incurred.
What is the entry for late arriving invoices?
DR Expense
CR A/P
What is the entry for late issuing of invoices?
DR A/R
CR Revenue
What is the formula for interest expense calculation on notes payable?
(Note Payable or Bank Loan or Mortgage Payable) x annual interest rate / 12 x number of months passed since last interest payment.
What is the journal entry for interest expense?
DR Interest Expense
CR Interest Payable
What is the journal entry for interest earned on notes receivable?
DR Interest Receivable
CR Interest Earned
What are the components of owner’s equity?
- Owner’s Capital
- Retained earnings
- Drawings
- Net income/loss
What does ‘notes payable’ refer to?
a written promise to pay a specific amount of money at a specified future date or on demand
What does ‘notes receivable’ refer to?
asset accounts tied to an underlying promissory note
What is the definition of prepaid expenses?
Current assets that are paid for in advance and need to be adjusted at year-end.
