Accounting Basics
Explain the difference between A/P and A/R
A/P- money that you owe
A/R- money that you are expecting to receive
What account represents the money that is earned for providing a service?
Revenue
What is the journal entry for buying inventory on account using the periodic inventory system?
Dr- Purchases, Dr- HST Recoverable, Cr- A/P
What 2 accounts are effected for an adjusting entry when you haven't performed the full service that you have been paid for at the end of the fiscal period?
Revenue and Unearned Revenue
The GAAP that states businesses should use the same accounting methods and procedures from period to period is...
The consistency principle
You pay off part of your bank loan. What is the journal entry?
Dr- Bank Loan
Cr- Bank
What is the term for the costs incurred to produce or purchase the products that a company sells?
Cost of Goods Sold
What type of account is unearned revenue? Explain.
Liability
Which financial statement does drawings go on?
The Balance Sheet
What is the equity equation?
Beg. Capital + Net Income (or - Net Loss) - Drawings = Ending Capital
Which inventory system updates inventory balances continuously?
The Perpetual Inventory System
What is the difference between a real and a nominal account?
A real account continues into the next fiscal period and a nominal account gets closed.
Explain the purpose of a cash flow statement and name each of the sections. Give an example of a type of transaction that would go in each of the sections.
To show the inflows and outflows of cash.
Operating Activities, Investing Activities, Financing Activities
The rules say that a credit entry is required to increase owner's equity. Explain why an expense account, which is part of equity, requires a debit entry to increase it.
An expense account requires a debit entry to increase because expenses reduce equity.
Which accounts are affected when making a sale in exchange for cash using the perpetual inventory system?
Cash, Sales, HST Payable, COGS, Inventory
Which account is used to show the net income or loss for the period before closing to the capital account?
The Income Summary