Exam 1

Question 1

When do you record revenue

Answer 1

in the period they occur (realization princple)

Question 2

When do you record expenses

Answer 2

in the period they occur (matching principle)

Question 3

Accounting Equation

Answer 3

A+L=OE

Question 4

General ledger

Answer 4

journal organized by account

Question 5

General Journal

Answer 5

Journal organized by date

Question 6

Net income

Answer 6

Revenue minus expenses

Question 7

Income Statement

Answer 7

Shows revenues and expenses over a period of time

Question 8

Balance Sheet

Answer 8

Shows a companies assets, liabilities, and owners equity

Question 9

Purpose of trial balance

Answer 9

to find any math errors that may have happened (make sure credits and debits balance)

Question 10

Cash basis accounting

Answer 10

Mark down transactions when cash changes hand

Question 11

Accrual accounting

Answer 11

recognizing revenues when they are earned and expenses when they occur

Question 12

4 types of adjusting entries

Answer 12

Accrued expenses
Accrued revenues
Deferred expenses
deferred revenues

Question 13

Accrued expense

Answer 13

debit expense
credit payable

Question 14

Accrued revenue

Answer 14

debit receivable
credit revenue

Question 15

Assets to expenses

Answer 15

debit expense account
credit related asset account

Question 16

liabilities to revenues

Answer 16

debit liability
credit revenue earned

Question 17

why do you adjust entries

Answer 17

to convert cash transactions into the accrual accounting method

Question 18

Materiality

Answer 18

all items likely to impact investing decisions must be recorded in financial statements with GAAP

Question 19

FASB

Answer 19

Financial accounting standards board they establish and approve GAAP

Question 20

GAAP

Answer 20

Generally accepted accounting principles

Question 21

Depreciation

Answer 21

The cost of an asset over its useful life

Question 22

Book value

Answer 22

net value of a firm’s assets

Question 23

Purpose of financial statements

Answer 23

Shows a company’s financial position, operations, performance, and cash flow