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Acct 229 > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

Service revenue increases with a credit, and unearned revenue

A

Decreases with a debit

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2
Q

When adjusting a trial balance, you______if they’re both debits or credits, and____if one is a debit and one is a credit.

A

Add; subtract

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3
Q

What transfers to the adjusted trial balance?

A

All unadjusted trial balances, plus or minus the adjustments

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4
Q

What transfers to the income statement?

A

Total adjusted service revenue and adjusted expenses

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5
Q

What information transfers to the balance sheet?

A

All adjusted assets, liabilities, owners equity (capital), and owner withdrawals

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6
Q

What is the difference between debits and credits on the income statement and balance sheet?

A

Net income

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7
Q

What is step 4 in the accounting cycle?

A

Preparation of financial statements i.e., income statement, statement of owners equity, and the balance sheet

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8
Q

What is step five in the accounting cycle?

A

Journalization and posting the aje’s

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9
Q

What is step six in the accounting cycle?

A

Journalize and post CJE’ S

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10
Q

Step seven in the accounting cycle is

A

Preparation of a post closing trial balance

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11
Q

What are the common expense accounts?

A

Insurance, salaries, supplies, interest, rent, and depreciation of equipment/property

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12
Q

What are common liability accounts?

A

Accounts payable, salaries payable, unearned revenue, notes payable.

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13
Q

What type of accounts are depreciation accounts?

A

Contra accounts

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14
Q

What is a contra account?

A

A sub account with the opposite effect.

Depreciation

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15
Q

What information is recorded onto the statement of owners equity?

A

The beginning owners equity amount, adding the net income for the year; then subtracting owners with drawls for the year, finally giving the ending owners equity

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16
Q

What information is recorded on to the income statement?

A

Service revenue and expenses giving the total net income

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17
Q

What information is recorded on the classified balance sheet?

A

Current assets, property plant and equipment, less accumulated depreciation giving the total assets. Liabilities, current and long term, owners equity, Then adding total liabilities and owners equity.

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18
Q

When inputting owners equity onto the classified balance sheet, you use

A

The total owners equity from the statement of owners equity, not from the balance sheet

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19
Q

What 4 things are posted on the CJE?

A

Service revenue, expenses, capital, and withdrawals

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20
Q

When debiting service revenue on a CJE, what do you credit?

A

Income summary

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21
Q

How do you post expenses to the CJE?

A

By debiting income summary, and crediting all expenses

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22
Q

How do you post the income summary to the CJE?

A

By debiting income summary and crediting capital with net income

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23
Q

How do you post with drawls to the CJE?

A

By debiting capital and crediting with drawls

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24
Q

How do you figure the current ratio?

A

By dividing current assets by current liabilities

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25
Q

How do you determine profitability?

A

By dividing net income by service revenue

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26
Q

How is net income determined?

A

By subtracting total expenses from total service revenue

27
Q

How do you enter capital on the post closing trial balance?

A

By subtracting with drawls from capital and then adding net income

28
Q

In reference to the cash basis method of accounting, when do you record revenues and expenses?

A

Upon receipt or payment

29
Q

Name two characteristics of the cash basis method of accounting

A

It’s simple and used for income tax reporting

30
Q

Why is the cash basis method of accounting not allowed by GAAP?

A

Because it doesn’t satisfy the matching principle of accounting

31
Q

Assume a plumbing company sells $500 in service on account on November 27, 2017 and pay his wages of $200 to employees on December 5, 2017. Customer doesn’t pay for the services until January 11, 2018. What is this an example of?

A

Not satisfying the matching principle of accounting

32
Q

When are revenues and expenses recorded using the accrual basis method of accounting?

A

Revenues are recorded once earned, and expenses are recorded once incurred.

33
Q

Name two characteristics of accrual basis method of accounting

A

Required by GAAP, and requires the use of AJE’ S

34
Q

What is net book value?

A

The cost of property plant and equipment minus accumulated depreciation

35
Q

When are AJ E’s recorded?

A

At the end of the accounting cycle

36
Q

How many types of AJE’s are there?

A

4

37
Q

Where are AJE‘s recorded?

A

Recorded in the general journal, and posted to the general ledger

38
Q

AJE’s are used for what four types of transactions?

A

Accrued revenue, deferred revenue, accrued expense, and deferred expense

39
Q

What is accrued revenue?

A

Revenue that is recorded before the cash is received. (Accounts receivable)

40
Q

What is deferred revenue?

A

Revenue that is recorded after the cash is received. (Unearned revenue)

41
Q

What is accrued expenses

A

Expense that is recorded before cash is paid or the asset is used up. (Accrued salaries)

42
Q

What is deferred expense?

A

Expense that is recorded after the cash is paid. (Prepaid insurance)

43
Q

AJ E’s are used to account for change in

A

Supplies, depreciation, pre-paid insurance and rent, unearned revenue, and accrued salaries payable

44
Q

What are the 4 CJE’s?

A

Service revenue, expenses, capital, with drawls

45
Q

What is a current asset?

A

An asset that is cash, or will be converted to cash or used up during the next 12 months

46
Q

What are the two types of assets?

A

Current assets, and property, plant, and equipment.

47
Q

What is a temporary account?

A

Account that relates to a particular accounting period and is closed at the end of that period

48
Q

What is a permanent account

A

An account that is not closed at the end of the period.

49
Q

What is the main difference between permanent account and temporary accounts?

A

Temporary accounts we make to 0 thru CJE’s, and permanent accounts we do not make to zero through CJE’s

50
Q

Give examples of a permanent account

A

Asset, liability, owner capital

51
Q

Give examples of temporary accounts

A

Revenues, expenses, income summary, owner with drawls

52
Q

What are the two types of liabilities?

A

Current and long-term

53
Q

What is a current liability?

A

A liability that must be paid with cash or services within one year.

54
Q

What is a long-term liability

A

Liability that does not need to be paid within one year. (Notes payable)

55
Q

What 3 CJE’s does income summary appear in?

A

Service revenue, expense, capital

56
Q

A Answers the question of how the business uses its earnings.

A

Statement of owners equity

57
Q

Owners capital accounts by
and net income, and
by and net losses.

A

Increases; owners contributions; decreases; owners with drawls

58
Q

Ending capital =

A

Beginning capital + owner contribution + net income or net loss - owner withdraw

59
Q

Unadjusted balance - supplies on hand=

A

Supplies expense

60
Q

What are the seven steps in the accounting cycle?

A 
1 = journalize
2 = posting to the ledger
3 = preparation of a worksheet
4 = preparation of financial statements
5 = journalize and posting of AJE‘s
6 = journalizing posting of CJE‘s
7 = preparation of a post closing trial balance
61
Q

Once the worksheet is prepared, what two columns are used to prep the financial statements?

A

Income statement and balance sheet

62
Q

Once the worksheet is prepared, which column do we use to journalize the AJE‘s?

A

Adjustments

63
Q

Once the worksheet is prepared which column do we use to journalize the CJE’s?

A

Adjusted trial balance

64
Q

What information is used to prepare a post closing trial balance?

A

Assets, liabilities, ending owners equity

Acct 229 (4 decks)

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