Introduction to Accounting
Who are the users of financial information reported on by companies?
Investors
Lenders
Creditors
What type of balance sheet account is cash? (Asset, liability, or equity?)
Asset
Cash
True or false: The purpose of an adjusting journal entry is to zero out the income statement account balances.
False
What is the accounting equation
Assets = Liabilities + Equity
What is the name of the governing accounting rules for public companies that operate in the United States?
GAAP (Generally Accepted Accounting Principles)
What type of balance sheet account is a Note Payable? (Asset, liability, or equity?)
Liability
A company takes out a loan for $50,000. This journal entry involves a debit to cash and a credit to....
Notes payable
Describe the purpose of adjusting journal entries.
The purpose of adjusting journal entries is to adjust asset and liability balances at the end of the year so that their balances are accurately reflected on the financial statements.
The job title of a person who checks financial statements ensuring that they are accurate and reliable is...
Auditor
On the balance sheet, assets and liabilities are always divided into what two categories?
Short term and long term
What type of account is "Unearned Revenue?" (Asset, liability, or equity?)
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On June 30th a company pre-pays rent for the upcoming 6 months. Will an adjusting journal entry be required related to this transaction at the end of the year?
Yes
Describe the difference between a revenue and a gain?
Revenues are made through the business performing its primary operations and gains are not.
What does the second D in DC ADE LER stand for?
Draw
What type of balance sheet account is prepaid rent? (Asset, liability, or equity)
A company pays for the upcoming 6 months of rent on June 30th, FY23. What is the journal entry that is recorded?
Dr. Prepaid Rent
Cr. Cash
A company pays for an insurance policy on January 1, FY23 that will cover them for the next 3 years. The total cost of 36,000. What is the adjusting journal entry that will be required at the end of the year?
Dr. Insurance Expense 12,000
Cr. Prepaid Insurance 12,000
What do we formally call the cost of borrowing money?
Interest
Define equity
The amount left over from the assets after liabilities are paid off.
The amount that is actually owned by the owner.
What type of income statement account is COGS? (Revenue, Expense, or Net Income)
Expense
A construction company is paid in advance for a building that will be built over the next year. They are paid in full in the amount of 5,000,000. What is the journal entry recorded when they are paid?
Dr. Cash 5M
Cr. Unearned Revenue 5M
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Define the following: Capitalize
To write something down as an asset