Exam 1 Flashcards
Fundamental Accounting Equation
Assets=Liabilities+Owners Equity
The Steps to Completing a Statement of Cash Flows (6 Steps)
- Read the problem & take note of “other info” section
- Record transaction for any “other info”
- Post revenues and expenses to the appropriate t-accts and matching sides
- Close all revenues and expenses to income summary
- Close income summary to retained earnings
- Reconcile all balance sheet accounts
What are the two-components of stockholder’s equity?
- Common Stock
- Retained Earnings
What is the formula for current ratio?
Current Assets
_________________
Current Liabliities
What is the formula for quick ratio?
Cash + Short Term Liabilities + Net Current Receivables
__________________________________________________
Total Current Liabilites
What is the formula for debt ratio?
Total Liabilities
______________
Total Assets
What is the formula for working capital?
Current Assets - Current Liabilities
What group presently creates accounting standards?
Financial Accounting Standards Board (FASB)
What gives the board of directors the right to change a company’s CEO?
Stockholders elect the board of directors and give the board the right to hire and fire executives
Three parts of the revenue recognition concept
- The price is known
- The seller has put forth substantial effort
- Implied or explicit agreement
Revenue concept
when and how much to record
Matching concept
Expenses are recorded in the same period of any revenue associated with that expense
When does cash accounting recognize revenues or expenses
Same time as cash flow or exchange
When does accrual accounting recognize revenues and expenses
When earned, similar to matching concept
When can you do reversing entries
When in the course of the adjusting process, you increase an asset or a liability.
