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Intermediate Accounting > Introduction > Flashcards

Introduction Flashcards

1
Q

What is the Basic Accounting Equation?

A

Assets = Liabilities + Stockholder’s Equity

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2
Q

What is the breakdown of Stockholder’s Equity?

A

Common Stock + Retained Earnings: Revenue - Expenses - Dividends

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3
Q

What is Common Stock?

A

new shares of stock issued in exchange for cash

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4
Q

What are Retained Earnings?

What category does it belong to?

A
  • recognized revenue as a result of the principle activity of the company
  • expenses incurred in an effort to generate income
  • dividends distributed to stockholders

considered Stockholder’s Equity

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5
Q

Can retained earnings be recorded if the cash has not been received?

A

Yes, retained earnings are recorded when the service has been performed, whether or not the cash has been received

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6
Q

What comprises the calculation of net income?

A
  • recognized revenue
  • incurred expenses
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7
Q

What is revenue?

A

income generated from principle activity of the company

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8
Q

What are expenses?

A

money spent in an effort to generate revenue

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9
Q

What are dividends?

A

distribution of company’s assets to its stockholders

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10
Q

How is cash received in advanced recorded?

Explain

A

Liability (unearned service revenue), until the obligation has been fulfilled, then it is recorded as Revenue

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11
Q

What category does Cash belong to?

Think of how this affects the accounting equation

A

Assets

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12
Q

What category does Accounts Receivable belong to?

Think of how this affects the accounting equation

A

Assets

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13
Q

What category does Prepaid Expenses belong to?

Think of how this affects the accounting equation

A

Assets

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14
Q

What are examples of Prepaid Expenses?

What stipulates a prepaid expense?

A
  • Rent
  • Insurance

Prepaid expenses must benefit more than one accounting period

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15
Q

What category do Supplies belong to?

Think of how this affects the accounting equation

A

Assets

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16
Q

What category does Equipment belong to?

Think of how this affects the accounting equation

A

Assets

17
Q

What category does Notes Payable belong to?

Think of how this affects the accounting equation

A

Liabilities

18
Q

What category do Accounts Payable belong to?

Think of how this affects the accounting equation

A

Liabilities

19
Q

What category does Unearned Service Revenue belong to?

Think of how this affects the accounting equation

A

Liabilities

20
Q

What category does Common Stock belong to?

Think of how this affects the accounting equation

A

Stockholder’s Equity

21
Q

What category does Retained Earnings belong to?

Think of how this affects the accounting equation

A

Stockholder’s Equity

22
Q

What category does Revenue belong to?

Think of how this affects the accounting equation

A

Retained Earnings -> Stockholder’s Equity

23
Q

What category do Expenses belong to?

Think of how this affects the accounting equation
Provide Examples

A

Retained Earnings -> Stockholder’s Equity

Only if affects current accounting period only
Ex: Rent; Salaries/Wages

24
Q

What category do Dividends belong to?

Think of how this affects the accounting equation

A

Retained Earnings -> Stockholder’s Equity

25
Q

What are the 3 parts of the T-account?

A
  • Title of the account
  • Left side (debit)
  • Right side (credit)
26
Q

How are debits and credits portrayed for Asset accounts?

What is a normal balance for this account? Why? (if applicable)

A
  • Increase in Debits (Left)
  • Decrease in Credits (Right)

It is normal for debit balance to be shown

27
Q

How are debits and credits portrayed for Liability accounts?

What is a normal balance for this account? Why? (if applicable)

A
  • Increase in Credits (Right)
  • Decrease in Debits (Left)

It is normal for credit balance to be shown

28
Q

How are debits and credits portrayed for Common Stock accounts?

What is a normal balance for this account? Why? (if applicable)

A
  • Increase in Credit (Right)
  • Decrease in Debit (Left)

It is normal for credit balance to be shown

29
Q

How are debits and credits portrayed for Retained Earning accounts

What is a normal balance for this account? Why? (if applicable)

A
  • Increase in Credit (Right)
  • Decrease in Debit (Left)

It is normal for credit balance to be shown

30
Q

How are debits and credits portrayed for Dividend accounts?

What is a normal balance for this account? Why? (if applicable)

A
  • Increase in Debit (Left)
  • Decrease in Credit (Right)

It is normal for debit balance to be shown b/c Dividends decrease Retained Earnings, thus decreasing Stockholder’s Equity

31
Q

How are debits and credits portrayed for Revenue accounts?

What is a normal balance for this account? Why? (if applicable)

A
  • Increase in Credit (Right)
  • Decrease in Debit (Left)

It is normal for credit balance to be shown b/c Revenue increases Retained Earnings, thus increasing Stockholder’s Equity

32
Q

How are debits and credits portrayed for Expense accounts?

What is a normal balance for this account? Why? (if applicable)

A
  • Increase in Debits (Left)
  • Decrease in Credits (Right)

It is normal for debit balance to be shown b/c Expenses decrease Retained Earnings, thus decreasing Stockholder’s Equity

33
Q

What is the order of the recording process?

A

Source document -> Journal entry -> Ledger

34
Q

What are the 3 components of a Journal Entry?

A
  • Date of transaction
  • Accounts and amounts to be debited and credited
  • Brief explanation of the transaction

Use specific accoount titles: “cash”, “equipment”, “notes payable”

35
Q

What is the Periodicity Assumption?

A

Accounting principle that states accounting time periods are generally a month, quarter, or year

36
Q

What is the Revenue Recognition Principle?

A

requires that companies recognize revenue in the accounting period the performance obligation is satisfied

Not necessarily when the cash is received

37
Q

Waht is the Expense Recognition Principle?

A
  • Match expenses with revenues in the period that the performance obligation is satisfied
  • Let expenses follow the revenues

Even if cash has not been exchanged

38
Q

Accrual-basis Accounting

A

Transactions are recorded in the period in which the events occur, even if cash hasn’t been exchanged

39
Q
A

Intermediate Accounting (6 decks)

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