Structure of Accounting

Question 1

What are the 2 components of “equity”?

Answer 1

1. Paid in Capital (PIC)

2. Retained Earnings (R/E)

Question 2

What are the 2 components of retained earnings?

Answer 2

1. Revenues

2. Expenses

Question 3

What are the five basic elements of accounting? (ALERE)

Answer 3

1. Asset
2. Liability
3. Equity
4. Revenue
5. Expense

Question 4

Asset is used to generate _______ (definition of assets)

Answer 4

Future cash; Future economic benefit

Question 5

On a T Table, what goes on the left side?

Answer 5

Asset, Expense

Question 6

On a T Table, what goes on the right side?

Answer 6

Liability, Equity, Revenue

Question 7

Liability is ______ of ______ (defintion)

Answer 7

Outflow; Asset

Question 8

Net asset is ______ minus ______

Answer 8

Revenue; Expenses

Question 9

What are the 3 types of companies? (SMM)

Answer 9

1. Service
2. Merchandising (retailers)
3. Manufacturing

Question 10

What are the 2 types of “trade payables” (AN)

Answer 10

1. Accounts payable

2. Notes payable

Question 11

What are the 2 types of “non-trade payables” (OB)

Answer 11

1. Others payable

2. Borrowing

Question 12

Revenue is the _____ of assets

Answer 12

Quick receipt (immediately liquefiable)

Question 13

What are the basic steps of a transaction?

Answer 13

1. Receipt of quick assets (e.g., cash receivable)
2. Completeness of obligation
3. Earned or Unearned revenue

Question 14

What are the two types of “receivables?”

Answer 14

1. Trade receivable

2. Non-trade receivable

Question 15

Expenses include both _____ and _____

Answer 15

Paid; Payable (depends on whether asset has been consumed)

Question 16

What are the 2 types of journalizing “inventory”?

Answer 16

1. First in, First Out

2. Weighted Average

Question 17

(Inventory) For Perpetual Inventory System, newly acquired inventory needs a new account called ____

Answer 17

Purchase

Question 18

(Inventory) For Periodic Inventory System, all inventory (previously existing or newly acquired) goes under account called _______

Answer 18

Merchandise

Question 19

(Inventory) When involving SALES and payments are received IN ADVANCE, you should record ______ in CR

Answer 19

Advanced (from “name of customer”)

Question 20

Revenue is _____, whereas Gain is ______

Answer 20

Repetitive revenue; One-time revenue

Question 21

Expense is ____, where as Loss is _____

Answer 21

Repetitive; One-time

Question 22

“Let the _____ follow the ______”

Answer 22

Expense; Revenue

Question 23

What are the 3 types of expenses? (CSI)

Answer 23

1. Causal relationship (e.g., COGS-sale)
2. Systematic & Rational Allocation (e.g., depreciation)
3. Immediate Recognition (e.g., insurance, supplies, salaries, etc.)

Question 24

What are the 3 types of “depreciation”?

Answer 24

1. Physical/Actual usage method (actual use/total use)
2. By time (straight line depreciation)
3. Accelerated method

Question 25

What does “IFRS” stand for?

Answer 25

International Financial Reporting Standard

Question 26

Accounting information must be _____ and ______

Answer 26

Relevant (probable); Faithful (measurable with certainty)

Question 27

The only way that liabilities may be reduced is to reduce ______

Answer 27

Unearned revenues (i.e., reduced payables, etc.)

Question 28

Total non-owner changes in equity (comprehensive income) is ______ plus _______

Answer 28

1. Net income

2. OCI

Question 29

What are the 4 types of OCIs?

Answer 29

1. Available-for-sale securities
2. Pension
3. Derivatives
4. Translation gain/loss (forex)

Question 30

R/E = ?

Answer 30

Prior R/E - Dividends + Net Income

Question 31

AOCI = ?

Answer 31

Prior OCI + OCI

Question 32

Net income + OCI = ?

Answer 32

Comprehensive Income (CI) / Total Non-Obnbwner Change