Accounting Standards
What does IFRS stand for?
International Financial Reporting Standards
What is a double entry?
A system of book keeping where every entry to an account requires a corresponding and opposite entry to a different account. The double-entry has two equal and corresponding sides known as debit and credit.
$12500 worth of supplies were purchased throughout the year. The year-end inventory count reveals that there is only $3650 worth of supplies on hand. Explain the debited and credited accounts.
Supplies Expense Debited 8850, and Supplies Credited 8850
What does closing an account mean?
Bringing an account to no balance or to zero balance.
Name and explain 3 GAAP Principles.
Dependent on answer.
What is the purpose of double entry bookkeeping?
Since a debit in one account offsets a credit in another, the sum of all debits must equal the sum of all credits. The double-entry system of bookkeeping standardizes the accounting process and improves the accuracy of prepared financial statements, allowing for improved detection of errors.
What are the 4 types of adjusting entries?
Adjusting for supplies, Prepaid expenses, late-arriving purchase invoice, and unearned revenue.
What two accounts are affected when closing out expenses?
Income summary and expense accounts.
What is the purpose of GAAP and IFRS?
The purpose of GAAP and IFRS is to ensure that financial reporting is transparent and consistent from one organization to another.
Supplies worth 20,000 are destroyed in a fire. What accounts are debited and credited.
Debit account- Loss due to fire for $20,000
Credit account- Supplies for $20,000
A $15000, two year insurance policy was purchased on March 1st 2020. What is the remaining prepaid insurance left at the end of June 2021? State the accounts debited and credited.
Insurance expense debited 10000, and insurance credited 10000.
How would you close the wages expense account?
Debit income summary and credit wages expense.
The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline?
Economic Entity
What accounts are affected when the owner invests into the business, and what accounts are affected when the owner withdraws money from the business?
Invest- Capital and Bank
Withdraw- Bank and Capital
What is accrual accounting?
When revenue and expenses is recognized as soon as it happens regardless of whether cash is received or paid.
During closing entries what account is created and why?
An equity account called income summary is created. It is used to record debit and credit amounts during te closing process.
A retailer wishes to report its merchandise inventory on its balance sheet at its retail value. This would violate which accounting principle/guideline?
Cost Principle
A company sold chairs for $350, which were originally purchased for $560. State the accounts affected.
Bank, Equipment and Capital.
A $30,000 cash advance for services was paid of Feb 15, 2020. The accountant credited the entire amount to fees earned. By Feb 31, only 25% of the work had been completed. What adjustments need to made.
Fees Earned debited by 32500, and unearned revenue credited by 32500.
What is the difference between a real account and a nominal account? Provide examples.
A nominal account is one that is closed out at the end of each fiscal year, while a real account carries forward its ending balance into the following year.