Financial Statements
Assets = Liabilities + Stockholders' Equity
What is the accounting equation?
This document is prepared before we report our financial statements.
What is a trial balance?
This journal entry is recorded when a customer returns merchandise previously sold on account.
What is Debit Sales Returns, Credit Accounts Receivable?
This method assumes that the first units we purchase are the first ones we sell.
What is FIFO?
This journal entry is recorded when a company issues no-par value common stock for cash.
What is Debit Cash, Credit Common Stock?
This financial statement showcases our assets, liabilities, and stockholders' equity at a specific point in time.
What is the balance sheet?
This entry is recorded when a company receives cash before it provides services to the customer.
What is Debit Cash, Credit Deferred Revenue?
This journal entry is recorded when we determine that a customer is unable to pay back an amount they owed.
What is Debit Allowance for Uncollectible Accounts, Credit Accounts Receivable?
This method is used when we depreciate equipment using the amount of units we expect it to produce.
What is activity-based method?
This entry is recorded when a company pays back money it previously borrowed from another, assuming that the amount wasn't paid in the same year as it was borrowed.
What is Debit Interest Expense, Interest Payable, and Notes Payable, Credit Cash?
This document showcases the changes in equity accounts over a period of time.
What is the statement of stockholders' equity?
This adjusting entry is recorded when a company uses supplies previously paid.
What is Debit Supplies Expense, Credit Supplies
This journal entry is recorded when a customer pays back the amount made by a sale on account within a discount period.
What is Debit Cash and Sales Discount, Credit Accounts Receivable?
This method results in the highest profitability in a period of rising inventory prices.
What is FIFO?
This journal entry is recorded when a company issues preferred stock with par value for cash.
What is Debit Cash, Credit Preferred Stock and Additional Paid-In Capital?
This is the first level of profitability in the multiple-step income statement.
What is gross profit?
This journal entry is recorded when we close out our revenue account at the end of the year.
What is Debit Sales Revenue, Credit Retained Earnings?
This is required for companies to eliminate fraud and safeguard their assets.
What are internal controls?
This is how we measure the cost of a long-term asset.
What is acquisition cost plus expenditures to prepare the asset for use?
This journal entry is recorded when a dividend is declared.
What is Debit Dividends, Credit Dividends Payable?
This type of analysis expresses each item in a financial statement as a percentage of a base amount.
What is vertical analysis?
This journal entry is recorded when a company owes salaries to employees, but doesn't pay them yet.
What is Debit Salaries Expense, Credit Salaries Payable?
This item increases the bank's cash balance in a bank reconciliation.
What is deposits outstanding?
This costing method is used when we assume that our ending inventory consists of our oldest units.
What is LIFO?
This journal entry is recorded when a company resells shares of its own treasury stock at a price lower than the price in which they repurchased it at.
What is Debit Cash and Additional Paid-in Capital, Credit Treasury Stock?