Chapter 1 Flashcards
asset account
resources of a company
represents a future economic benefit
(ex: cash, inventory, land, building)
liability account
obligation in the future
future expense
(student loans)
Equity account
owner residual claim on assets (treasury stock)
E=A-L
Revenue Account
amount recorded when computer sells product to customers
Expense Account
costs of providing products/services
Dividends
distributions of the stockholders
Financing activities
activities w investors and creditors (lendor and owner)
L+E
cash flow
Investing Activities
Transactions involve purchasing resources that are expected to benefit company for several years (equipment) A
cash flow
Operating Activities
Transactions that relate to primary operations of company (rent, salaries, tax, utilities)
Revenue/ Expenses
cash flow
Net Income
Revenue-Expenses
What are the two basic goals of accounting language?
record transactions and communicate what transactions are saying
Income Statement
financial statement that reports revenues and expenses over time
NI= Revenue-Expenses
Balance Sheet
-Shows money at a specific time
A=L+E
E: common stock + RE
Statement of changes in equity (equation)
beginning equity balance+issue stock-purchase treasuring stock+NI-dividends= end equity balance
over time
When preparing information on sheet…
Name of company
name of financial statement
period of time at date
amount invested by stockholders
common stock
$ that has been kept for company use rather than distributed as dividends
retained earnings
How do you calculate retained earning at the end of a time period?
beg RE+NI-div
What acct are employees? salaries?
expense; espense
what acct is service?
revenue
what acct is prepaid rent/expense?
asset
what acct is accounts recievable?
asset
What is the basic question extended?
A=L+E
E=CS+RE
RE=NI (Rev-Exp)- dividends
When you’re repaying a loan
loan: accounts payable
repay the loan w notes payable
4 types of adjusting entries
deferrals (paid in advance)-
prepaid expense->Pay cash to purchase an asset in the current period that will be recorded as an expense in a future period.
deferred revenue->Receive cash in the current period that will be recorded as a revenue in a future period
accurals (service and then money)
accrued revenue- Record a revenue in the current period that will be collected in cash in a future period
accrued expense- Record an expense in the current period that will be paid in cash in a future period.
How do you record a prepaid expense adjusting entry?
Debit an expense account and credit an asset account
Adjusting entry for prepaid rent?
d: rent expense
C; prepaid rent
Adjusting entry for prepaid supplies?
d: supplies expense
c: supplies
adjusted entry for prepaid equip?
d: depretiation expense
c: accumulated depretiation
calc acc dep-cash paid to purchase equp/ # of months
How do you record a deferred rev adj entry? (include wht to credit and debit)
Debit a liability account and credit a revenue account
d: deffered revenue
c: service revenue
how do you record an accured expense?(include wht to credit and debit)
Debit an expense account and credit a liability account
adj entry for salaries?
d: salaries exp
c: salaries payable
adj entry for utilities?
d: utilities expense
C: utilities payable
adj entry for interest?
d: interest expense
c: interest payable
how do you record a accured revenue?
Debit an asset account and credit a revenue account
service revenue
d: accts recievable
c: service revenue
what account is not closed during the closing process?
retained earnings; Only temporary accounts are closed. Temporary accounts include all revenues, expenses, and dividends. Balances of temporary accounts are transferred to the balance of Retained Earnings, which is a permanent account that is not closed.
Order of accts to follow..
- recors and post adjusted entries
- post transactions to T accts in general ledger
- record transaction
- prepare fin statements
- record and post transaction
basic format of a closing entry?
debit revenue
credit expenses
credit r/e
characteristics of adj entries
-NO cash
rev/exp + asset/liability
cash reciepts of company that have not been added to bank record of company balance
deposit outstanding
checks from company tht have not been subtracted from bank record of company balance
check outstanding
principle states that we record revenue in the period in which we provide goods and services to customers.
revenue recognition principle
Companies typically report expenses in the same period as the revenues they help to generate
matching principle
Cash has internal controls and its maqin characteristic is
seperation of powers
Chas is equivalent to currency, money market, $, bank accounts….
anything that can liquidate in 90 days
To reconcile a bank acct, bnk side
+deposit outstanding -check outstanding both error
to reconcile bank acct, company/book side
\+notes recieved by bank \+interest recieved -NSF checks -unrecorded debit cards -bank services both comp error **This side gets a journal entry
