prelim 1

Question 1

assumptions on BS

Answer 1

SEPARATE ENTITY: business activities accounted for separately from activities of owners, all other persons and other entities
e.g. an owners house isnt included on balance sheet

GOING CONCERN (continuity):
business will continue to operate into the foreseeable future unless there is evidence showing otherwise

MONETARY UNIT: financial information in terms of national monetary unit

Question 2

deferred expense

Answer 2

**cash before
prepaids
supplies
acc. depreciation

AJE Ex:
expense (+E, -SE)
»Prepaid Expense (-A)

Question 3

deferred rev

Answer 3

**cash before
unearned rev/ deferred rev
deposits

AJE ex:
unearned rev (-L)
»Revenue (+R, +SE)

Question 4

accrued rev

Answer 4

**cash after

receivables

Receivable (+A)
»Revenue (+R, +SE)

Question 5

accrued exp

Answer 5

**cash after
payables

ADJ ex:
expense (+E, -SE)
»payable (+L)

Question 6

total asset turnover ratio

Answer 6

operating revenues/ average total assets