Math Knowledge Flashcards
Define Assets
Increase in amount of assets recorded by debits
Increase in the dollar amount of the account
Define Liability
Decrease in amount of liabilities recorded by debits
Decrease in the dollar amount of the account
Define Debit
Less Money the checkbook owes to you
Define Credit
More money the checkbook owes to you
Define Accounting Record
The book of original entry
Contains information about each business transaction
Define General Journal
Provides a place to record: date, name of the accounts involved, an explanation, the account numbers of the accounts, and the effect on the accounts named
Define Posting
Process of copying journal entry information and transferring it from the journal to the ledger
Define Double Entry System of Accounting
Equal debit and credit entries are made for every transaction
Balance Sheet Equation
Assets (Increase debits, decrease credits)
Liabilities + Owner’s Equity (Decrease debit and increase credit)
Define Revenues
Increases in revenues are credit
The bank owes you more money (+)
Define Expenses
Increases in expenses are debits
The bank owes you less money (-)
Increase in value is represented by?
Credit
Increase in outflow is represented by?
Debit
What are the four basic rules that govern the recording of transactions?
1) Each transaction must be recorded separately
2) The transactions must be recorded so that Assets = Liability + Owner’s Equity
3) Each transaction will affect at least two accounts
4) Every transaction must be recorded such that debits equal credits
John pays $10.50 in cash for OTC products. Create a T account.
Cash
Debit | Credit
$10.50
Sales
Debit | Credit
$10.50
Easy definition of liability
Money you have to pay
Easy definition of Account’s Receivable
Money that is owed to the store/company
When is an Account Receivable account used?
When a sale is made but some or none of the total price is collected from the patient/3rd party with the intent to pay later
John does not have health insurance and is a self-pay patient. Today, John charges $50 of prescriptions and will pay this off by the end of the month. Create a T account.
Accounts Receivable
Debit | Credit
$50
Sales
Debit | Credit
$50
Mr Jones, pharmacist, process through Caremark a prescription claim for $200. The claim is adjudicated correctly and he is required to collect a $45 copayment. Create a T account.
Cash
Debit | Credit
$45
Accounts Receivable
Debit | Credit
$155
Sales
Debit | Credit
$200
What are pre-paid expenses?
ASSETS bc the owner was able to secure the use of this item for the long term
Your landlord on January 1st extends your pharmacy lease for another 12 months at $2000 per month. You pay for the entire year to get this rate. Create a T account.
Prepaid Expenses
Debit | Credit
$24000
Cash
Debit | Credit
$24000
On February 1st, your accountant creates a transaction that accounts for the consumption of the value of one month of prepaid assets as well as records an expense for the company. Create a T account.
Rent Expense
Debit | Credit
$2000
Prepaid Expense
Debit | Credit
$2000You buy $6000 of drug products from Mckesson on credit on January 2nd. Create a T account.
Drug Purchase
Debit | Credit
$6000
Accounts Payable
Debit | Credit
$6000
On January 10th, you pay Mckesson for the entire total of $6000. Create a T account.
Accounts Payable
Debit | Credit
$6000
Cash
Debit | Credit
$6000
Owner’s Equity is affected by?
Any money flowing into or out of the business
Paul increases his investment in Williams Pharmacy by $50,000 on January 1st. Create a T account.
Cash
Debit | Credit
$50000
Paul Williams, Capital
Debit | Credit
$50000
One February 1st, Paul withdraws $3000 from the business for personal living expenses. Create a T account.
Paul, Withdrawal
Debit | Credit
$3000
Cash
Debit | Credit
$3000Define Contra-accounts
Accounts that represent discounts, returns or allowances that directly reduce the value of sales or purchases accounts
Contra-accounts normally have?
Debit balances
Define Net Sales
Math expression that results from subtracting the discounts and returns from the gross or total amount of sales that was recorded in the sales ledger
Mrs. Jones buys a faulty nebulizer-value $50 paid in cash. Create a T account.
Cash
Debit | Credit
$50
Sales
Debit | Credit
$50
Now Mrs. Jones brings back her faulty nebulizer. Create a T account.
Sales Return
Debit | Credit
$50
Cash
Debit | Credit
$50
Merchandise Sold at 2$ off if paid within 10 days of invoice (total is $100) but they do not pay within the 10 days. Create a T account.
Accounts Receivable
Debit | Credit
$100
Sales
Debit | Credit
$100
Merchandise Sold at 2$ off if paid within 10 days of invoice (total is $100) and they do pay within the 10 days. Create a T account.
Cash
Debit | Credit
$98
Discount
Debit | Credit
$2
Accounts Receivable
Debit | Credit
$100Define Purchase account
Cost of merchandise bought for resale during the accounting period
Expense account
Accumulation of dollars in this account is reflected by debit
Usually have a credit balance
Define Freight-In
A business account for transportation costs associated with purchases
Mrs Smith pays you $300 cash for her prescription that she buys. Create a T account.
Cash
Debit | Credit
$300
Sales
Debit | Credit
$300
Susie Clark goes to your pharmacy with a prescription for a new medication and is told that her co-pay is $45. She is covered by Blue-Cross. She receives the prescription and notices on the tax receipt that the cost was $200. How did the pharmacists account for the sale of this prescription? Create a T account.
Cash
Debit | Credit
$45
Accounts Receivable
Debit | Credit
$155
Sales
Debit | Credit
$200
Mrs. Smith wants to charge her $300 prescription on her personal store account (not credit card!)
Accounts Receivable
Debit | Credit
$300
Sales
Debit | Credit
$300
Paying for 6 months rent at $1000 a month
Prepaid Expense
Debit | Credit
$6000
Cash
Debit | Credit
$6000
You have consumed 1 month of your prepaid expense. Create a T account.
Rent Expense
Debit | Credit
$1000
Prepaid Expense
Debit | Credit
$1000
Bob Smith Pharmacy purchase $300 of drugs on credit from the wholesaler.
Purchases
Debit | Credit
$300
Accounts Payable
Debit | Credit
$300
Bob Smith Pharmacy pays cash for $300 of supplies for Office Max that will be consumed within the accounting period.
Office Supplies Expenses
Debit | Credit
$300
Cash
Debit | Credit
$300
Dr. Patry invests $5000 in the business from his personal bank account
Cash
Debit | Credit
$5000
Dr. Patry, Capital
Debit | Credit
$5000
