Conceptual Framework
What is the framework that FASB developed to provide the underlying foundation for US accounting standards?
Conceptual Framework
Probably future economic benefits obtained or controlled by a particular entity as a result of past transactions or events
Assets
Purchased Supplies on Credit. Which account is debited?
Supply Inventory
The account expenses are closed in to
Retained Earnings
Name one of the enhancing qualitative characteristic
Comparability, Verifiability, Timeliness, and Understandability
Unearned Revenue is what type of an account
Sold $5000 Merchandise Inventory on credit. Cost of goods sold were $2000. What are the journal entries that need to be recorded?
Debit, Accounts Receivable, $5000
Credit, Sales Revenue, $5000
Debit, COGS, $2000
Credit, Merchandise Inventory, $2000
Depreciation on equipment totaled $12,000. What is the journal entry to record the depreciation?
Debit, Depreciation Expense, $12,000
Credit, Accumulated Depreciation, $12,000
Name one of the qualitative characteristics of Relevance
Predictive Value, Confirmatory Value, Materiality
Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations
Expenses
Purchased a piece of equipment for $30,000. Paid $10,000 in cash and signed a 5 year note for the remainder.
What is the journal entry?
Debit, Equipment, $30,000
Credit, Cash, $10,000
Credit, Note Payable, $20,000
Account Prepaid Insurance Expense is closed in to
Prepaid Insurance Expense is a permanent account and is not closed out at the end of the period.
In order for an item to have faithful representation, it must be _____________, ____________, and _________________.
Complete, Neutral, and Free from Error
Which of the following is true:
a) A+L=E
b) L-E=A
c) A+E=L
d) A-L=E
The accounting equation is A=L+E,
therefore the answer is d) A-L = E
Cash of $2000 was received from a customer for consulting services to begin later in August. Services were completed in early September. What is the journal entry?
Debit Cash $2000
Credit Unearned Service Revenue $2000
On November 1, 2024, the company borrowed $200,000 from a bank. The note requires principal and interest at 12% to be paid on April 30, 2025. What is the adjusting journal entry on December 31, 2024?
Debit, Interest Expense, $4,000
Credit, Interest Payable, $4,000
What is the Key Constraint in the Conceptual Framework
Cost Effectiveness
Increases in equity from peripheral or incidental transactions of an entity
Gain
Paid $3000 to an insurance company for fire and liability insurance for a 12 month period beginning. What is the Journal Entry?
Debit, Prepaid Insurance Expense, $3000
Credit, Cash, $3000
Mircrochip began the year with $2,000 in its asset account, Supplies. During the year $6500 in supplies were purchased and debited to supplies. At year end, supplies costing $3250 remain on hand. What is the adjusting journal entry to adjust supplies to actual?
Debit, Supplies Expense, $5250
Credit, Supplies, $5250