Final Flashcards
The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the
Going-concern principle
Transactions are initially recored in the
General journal
All of the following are external users of account information except for
Taxing Authorities
Regulatory Agencies
Labor Unions
Company Officers
Company Officers
A purchase of supplies on account requires a credit to
Accounts Payable
A consulting firm performs services for a customer and bills the customer $450. How should the firm record this transaction?
A/R increase by $450; Revenues increase by $450
Latimer Company has total assets of $1,000,000, liabilities of $400,000, and equity of $600,000. What is the debt ratio?
40%
A Company forgot to record accrued and unpaid employee wages of $350,000 at year end. This oversight would
Overstate net income by $350,000
On May 1 of the current year, a two-year insurance policy was purchased for $24,000 with coverage to begin immediately. What is the amount of insurance expense that appears on the company’s income statement for the current year ended December 31?
8,000
Prior to recording adjusting entries, the Supplies Inventory account has a $150,000 debit balance. A physical count of Supplies Inventory shows a balance of $35,000 still on hand. The required adjusting journal entry is
Debit Supplies Expense 115,000; Credit Supplies Expense 115,000
On November 1 Nair Corporation receives $3,600 cash from Ristaino, Inc. for consulting servies to be provided evenly over the period of November 1, to April 30. The adjusting entry on December 31 (which is Nair Corporation’s year-end) includes a
Debit to Unearned Service Revenue of 1,200
Accounting is an information and measurement system that does all of the following except
Identifies business activities
Records business activities
Communicates business activities
Eliminates the need for interpreting financial data
Helps people make better decisions
Eliminates the need for interpreting financial data
External users of accounting information include all of the following except
Shareholders
Customers
Purchasing managers
Government regulators
Creditors
Purchasing managers
A corporation is
A business legally separate from its owners
Raymere Mendiola contributed $250,000 Cash and Land worth $500,000 to open his new illustration business. Which of the following journal entries are made to record this transaction
Cash 250,000
Land 500,000
R. Mendiola Capital 750,000
The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the
Economic-entity assumption
Write out words for APIC
Additional paid-in capital
The rule that (1) requires revenue to be recognized when goods or services are provided to customers and (2) at the amount expected to be received from the customer is called
Revenue recognition principle
Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?
Expense recognition (Matching) principle
If a company uses $1,300 of its cash to purchase inventory, the effect on the accounting equation would be
One asset increases $1,300 and another asset decreases $1,300, causing no effect
Prepaid accounts (also called prepaid expenses) are generally
Assets that represent prepayments of future expenses
Identify the statement below that is incorrect
The normal balance of accounts receivable is a debit
The normal balance of owner’s withdrawals is a debit
The normal balance of unearned revenues is a credit
The normal balance of an expense account is a credit
The normal balance of the owner’s capital account is a credit
The normal balance of an expense account is a credit
Identify the account below that is classified as a liability in a company’s chart of accounts
Cash
Unearned Revenue
Salaries Expense
Accounts Receivable
Supplies
Unearned Revenue
Working Capital Formula
Current Assets - Current Liability
Write two contra accounts
Withdrawal
Accumulated Depreciation
Four factors of economic production
Land
Labor
Capital
Entrepreneurship
Which of the following is NOT an asset account
Cash
Land
Services Revenue
Buildings
Equipment
Services Revenue
A business uses a credit to record
A decrease in an asset account
A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the
Time period assumption
A accrual basis of accounting is
Generally accepted for external reporting because it is more useful than cash basis for most business decisions
The difference between the cost of an asset and the accumulated depreciation for that asset is called
Book Value
A company’s Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the period?
$2,900
A trial balance prepared after adjustments have been recorded is called an
Adjusted trial balance
The adjusting entry to record an accrued expense is
Increase an expense; increase a liability
The adjusting entry to record an accrued revenue is
Increase an asset; increase revenue
Which of the following is classified as a current asset?
Accounts receivable
The current ratio is
Used to help assess a company’s ability to pay its debts in the near future
CPA
Certified Public Accountant
GAAP Regulatory Bodies are
FASB and SEC
Father of accounting
Luca Pacioli
Four financial statements in order
Income Statement
Retained Earnings
Balance Sheet
Cash Flow Statement
A company has $550,000 in net sales and $193,000 in gross profit. What is COGS:
$357,000
Which relationship is correct
Equipment is amortized
Goodwill is depleted
Copyrights are amortized
Timber is depreciated
Land is depreciated
Copyrights are amortized
A “betterment” is a type of expenditure that improves an assets productivity and
Prolongs an assets economic useful life
When recording GAAP depreciation expense which factor is an estimate
Economic useful life
Deferred Tax Assets result from
Timing differences related to GAAP accounting vs tax accounting
According to the Matching Principle the cost of inventory becomes an expense when
The inventory is sold
INVENTORY VALUE ON BLAANCE SHEET CLOSEST TO CURRENT COST
FIFO
RESULT IN THE LOWEST NET INCOME TAX
LIFO
In a manufacturing company inventory that is ready for sale is called
Finished goods
The LIFO inventory method assumes that the costs of the last units purchased are
The first to be allocated to costs of goods sold
Sales Discounts and Sales Returns and Allowances are
Contra Revenue Accounts
The account Allowance for Bad Debts would be given an account number in the chart of accounts that begins with what digit?
1xx
If ending inventory is understated net income will be
Understated
Periodic Inventory System updates
Inventory records at the end of an accounting period
When reconciling cash which of the following items are adjusted on the bank side of the reconciliation workpaper
Bank services charges
Deposits in Transit
Book errors
NSF Checks
Deposits in Transit
