Accy Midterm Flashcards
Name of org that writes US GAAP
FASB or financial accounting standards board
Accounting equation
assists = liabilities + stockholders’ equity
Assets
resources owned by the company -> cash, inventory, receivables, pre paid expenses
Liabilities
obligations or debts owed to others -> accounts payable, notes payable, deferred revenue
stockholder’s equity
owner’s claim on the assets after liabilities are paid -> common stock, preferred stock, retained earnings, additional paid in capital
debits
entry made on the left side of an account
credits
an entry made on the right of an account
assets, debits and credits
debits: increase assets
credits: decrease assets
liabilities, debits and credits
debits: decrease liabilities
credits: increase liabilities
credits and debits stockholders’ equity
debits: decrease SE
credits: increaser SE
what does revenue affect?
increase net income and stockholder’s equity
Income statement
revenue - expenses = net income
pretax income - (pretax income x tax rate) = net income
summary of business’s revenues and expenses over a period of time
statement of stockholders’ equity
retained earnings, decreased by dividends and increased by net income
-explains the change from one balance sheet to another
statement of cash flow
operating (current A + L), financing (equity), investing (concurrent A + L)
-amount of money coming in and out
Order of steps
income statement, balance sheet, cash flow statement
Trial balance
accounting report showing the closing balances in all general ledger accounts at a point in time
DEALER trick
Dividends + Expenses + Assets = Liabilities + owner’s Equity + Revenue
accrued revenue
revenues earned but not yet recorded
accrued expenses
expenses incurred but not yet recorded
deferred revenue
cash received before services are performed
prepaid expense
payments made in advance for expenses
unadjusted trial balance
prepared before adjusting entries are made. shows the balance before any end-of-period adjustment
adjusted trial balance
prepared after adjusting entries are made. ensures that all accounts are updated for financial statement preparation
Sales (revenue) entries
debit: accounts receivable (or cash)
credit: sales revenue
Purchases (expenses)
debit: expense account (supplies, rent)
credit: accounts payable (or cash)
Cash receipts (receiving cash for services/products)
debit: cash
credit: accounts receivable (or sales revenue)
Cash payments (paying expenses or creditors)
debit: accounts payable (or expenses)
credit: cash
inventory purchases
debit: inventory
credit: accounts payable (or cash)
inventory sold
debit: cost of goods sold
credit: inventory
accrued revenue
debit: accounts receivable
credit: revenue
accrued expenses
debit: expense
credit: liability (wages payable)
prepaid expenses
debit: expense
credit: prepaid assest
unearned revenue
debit: unearned revenue (liability)
credit: revenue
components of income statement
revenue (service revenue) and total expenses (cost of good sold, salary expense, utility expense, rent expense, interest expense, supply expense, depreciation expense, income tax expense) then solve for net income
components of statement of retained earnings
beginning balance, net income, dividends, and ending balance
ending retained earnings = beginning retained earnings + net income - dividends
components of balance sheet
assests (cash, accounts receivable, inventory, prepaid rent, supplies, equipment, accumulated depreciation, land)-> total assets and total liability and stockholder’s equity (accounts payable, salary payable, interest payable, unearned revenue, long-term debt, common stock, retained earnings)
retained earnings: refer to the ending balance on the statement of retained earnings just made
