Journal Entries
What is an example of an adjusting entry?
Accounting for timing difference--
1. recognizing expiration of prepaid assets (supplies, prepaid insurance, etc.)
2. recognizing fulfillment of obligation related to deferred revenue
3. Recognizing accrued expenses (salaries payable, etc.)
Financial statement that shows revenues - expenses = net income
Income statement
The accounting equation.
What is Assets = Liabilities + Stockholder's Equity
How do you calculate gross profit?
Net Revenues - COGS
What time period is considered current when evaluating assets and liabilities as current vs. long term.
anything that matures within 1 year
Account debited when a company issues common stock.
What is cash?
What are 3 examples of liabilities a company may have?
Impact on accounting equation when services are provided on account.
Increase assets (A/R); increase revenue
After my first year of operations, I have 1,000,000 in my AR balance and I do not believe I will collect 5% of this balance. What is my bad debt expense for the year?
50,000
List three accounts that have a normal credit balance
liabilities, common stock, revenues (specific examples are okay)
What accounts are impacted when a company writes inventory down to the lower of cost and net realizable value?
COGS x
Inventory x
What is the account that is used to account for how much inventory that was sold for cost. What financial statement does it show up on?
COGS --> income statement
Purchasing land with cash would have what effect on the accounting equation?
No effect on accounting equation
How much interest will I accrue on a 9-month, $10,000 note issued at 12% interest, assuming I issued the note on September 1, and have a year-end date of December 31.
Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as
What is operating activities
Ambassador Hotels purchases one year of fire insurance coverage on December 1 for $24,000 ($2,000 per month), debiting Prepaid Insurance. On December 31, Ambassador would record what journal entry?
Insurance Expense 2,000
Prepaid Insurance 2,000
Offer a lower price for prompt payment.
What is a sales discount.
How are my revenues impacted by a customer returning products (and what account is used?)
All revenues decrease; sales return contra revenue account increases
In the statement of stockholders' equity, Retained Earnings had a beginning balance of $25,000. During the period, the company reports a net income of $10,000 and a dividend of $4,000. The ending balance in the Retained Earnings account is
What is $31,000
What accounts are closed on the end of the year?
Temporary accounts - revenues, expenses, dividends.
Cash 9,800
Sales Discount 200
Accounts Receivable 10,000
Tell me 3 things about the allowance for uncollectible account
1. type of account
2. its normal balance
3. what financial statement it shows up on (and where)
1. contra asset
2. increases with a credit
3. balance sheet with the accounts receivable
Impact on accounting equation when good are sold on account (using a perpetual inventory system).
Asset (A/R) increase; revenue increase; assets (inventory) decrease; expense (COGS) increases
What is my net revenue for a company that sells a $4,000 service for 20% off during the month of December, assuming the customer also qualified for a sales discount of 2% for paying within the term windows.
3,136
1. What is the order in which financial statements are prepared
2. What number impacts stock prices more than anything else?
1. Income statement --> SSE --> Balance Sheet --> SCF
2. NET INCOME!!!