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acc 231 > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

What are the two main categories of adjustments?

A

Accruals and deferrals

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2
Q

Deferrals record revenues and expenses ________ cash is received or paid.

A

after

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3
Q

What is AJE?

A

Adjusted journal entry

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4
Q

What is the basic accounting peiod?

A

One year

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5
Q

Based on accrual accounting, when to accounts need to be adjusted?

A

At the end of the period.

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6
Q

Accrued revenues is what?

A

Revenues earned before cash is received.

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7
Q

How often does a company go through an accounting cycle?

A

Can be monthly, quarterly and/or annually

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8
Q

Accruals record revenues and expenses ________ cash is received or paid.

A

before

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9
Q

Revenue Recognition Principle. What is it?

A

Recording revenues when they are earned by providing goods or services to customers.

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10
Q

What is the Depreciation Expense Calculation?

A

Depreciation Expense per Year = Cost of asset - salvage value of asset / useful life of asset.

Monthly depreciation = Annual depreciation / 12

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11
Q

Pepper Potts pays her assistant a monthly salary of $4,500. Potts pays the assistant on the 1st of each month for the past months work. What adjusted entry is required on September 30th?

A

Sept. 30th Dr. Salaries Expense $4,500

Cr. Salaries Payable $4,500

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12
Q

True or false. Prepaid expenses are liabilities.

A

False. Prepaid expenses are assets.

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13
Q

Avengers Inc. purchases a jet on August 1 for $100,000 and is expected to last 5 years. What is the adjusted entry for August 31. What does the adjusted entry look like?

A

Aug 1 Dr. Equipment $100,000
Cr. Cash $100,000
Aug 31 Dr. Depreciation Expense, Equip. $20,000
Cr. Accumulated Depreciation, Equip. $20,000

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14
Q

What is the calculation for current ratio?

A

Current ratio = current assets / current liabilities

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15
Q

What is accrual accounting?

A

Accounting method that records revenues when earned and expenses when incurred without regard to when cash is exchanged.

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16
Q

During the closing process, you must ______ each revenue account for the amount of its _____ balance and then ______ Retained Earnings for the total amount of the ________.

A

debit, credit; credit, debits

17
Q

True or false. Unearned revenue is an asset.

A

False, it is a liability.

18
Q

Avengers Inc. pays $2000 a month in rent for Avengers Tower. The company prepays 4 months of rent on April 1st. What is the adjusted journal entry?

A

Apr 1 Dr. Prepaid Rent $8,000
Cr. Cash $8,000

Apr 30 Dr. Rent Expense $2,000
Cr. Prepaid Rent $2,000

19
Q

What is liquidity?

A

How quickly an asset can be converted to cash and used to pay off liabilities within the next year.

20
Q

What are the three ratios to help analyze a company’s debt-paying ability?

A

Net Working Capital, Current Ratio, and Debt Ratio

21
Q

During the closing process, you must ______ each expense account for the amount of its ______ balance and then ______ Retained Earnings for the total amount of the ________.

A

credit, debit; debit, credits

22
Q

Expense Recognition Principle. What is it?

A

Recording expenses in the time period they were incurred to produce revenues, thus matching them against the revenues earned during that same period.

23
Q

A client pays $8,000 in advance to Avengers Inc. on Sept. 15th for services to be done at a later date. Avengers Inc. begins work right away. How is this reflected on the adjusted journal entry as of Sept. 30th?

A

Sept 15 Dr. Cash $8,000
Cr. Unearned Service Revenue $8,000

Sept 30 Dr. Unearned Service Revenue $4000
Cr. Service Revenue $4000

24
Q

How is Gross Profit Calculated?

A

Net Sales - COGS = Gross Profit

25
Q

On May 14, Avengers Inc. pays $1000 for office supplies. Assume that Avengers Inc. has supplies on hand costing $750 at May 31. What adjusting entry is required on May 31?

A

May 14 Dr. Supplies $1,000
Cr. Cash $1,000

May 31 Dr. Supplies Expense $250
Cr. Supplies $250

26
Q

What is the calculation for Net Working Capital?

A

Net Working Capital = Current Assets - Current Liabilities

27
Q

What is the most liquid asset?

A

Cash

28
Q

True or False. Accumulated Depreciation, Equipment is a contra-account.

A

True

29
Q

During the closing process, you must ______ each dividends account for the amount of its ______ balance and then ______ Retained Earnings for the amount.

A

credit, debit; debit

30
Q

Supplies are treated the same as what?

A

Prepaid expenses

31
Q

Assets, Liabilities, Common Stock and Retained Earnings are _________ accounts.

A

Permanent

32
Q

What is the calculation for debt ratio?

A

Debt ratio = total liabilities / total assets

33
Q

Revenues, Expenses and Dividends are _______ accounts.

A

Temporary

acc 231 (3 decks)

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