Accounting Basics
Assets = Liabilities + Equity
What is the the accounting equation?
Account used to record the owner's investment in the business.
What is the Capital or Equity account?
The term for inventory lost due to theft, damage, or errors.
What is shrinkage?
This account would be affected if you bought a llama as office mascot.
What is Office Supplies (or Miscellaneous Expense)?
Paying $12,000 cash on January 1 for a one‑year office lease creates this type of asset.
What is Prepaid Rent?
A framework for spotting high-risk fraud situations.
What is the Fraud Triangle?
Prepaid insurance is this kind of account.
What is an asset?
Buyer pays the freight.
What is FOB shipping point?
A company buys 100 pencils at $0.10 each. The account and the amount debited is _________.
What is Office Supplies for $10?
The proper time to record expenses.
What is when they are incurred?
Lenders, shareholders, and customers are these type of F/S users.
What are external users?
The 3 account categories with a normal credit balance.
What are liabilities, owner capital/equity, and revenue?
This inventory system continuously updates records for inventory purchases and sales.
What is perpetual inventory system?
This depreciation method allocates more expense in the early years of an asset’s life.
What is Double-Declining Balance?
The proper time to record revenue.
What is when it is earned?
Managers, sales staff, and controllers directly involved in managing operations.
What are internal users?
The original book of entry for a transaction.
What is the General Journal?
At year-end, inventory should be recorded at this to comply with GAAP.
What is lower of cost or market (LCM)?
If you eat the newest cookie in the jar first, you’re following this inventory method.
What is LIFO?
Revenue earned but not yet received in cash is recorded as this type of adjustment.
What is an accrual?
A common set of accounting rules, standards, and procedures issued by the Financial Accounting Standards Board.
What is Generally Accepted Accounting Principles (GAAP)?
Transferring journal entries to the ledger is called _______.
What is posting?
Daily Double: Beginning inventory + Purchases - Ending inventory = this.
What is cost of goods sold?
In a time of rising prices, this inventory valuation method results in higher net income.
What is FIFO?
When cash is received before revenue is earned, such as prepaid rent, this adjustment is required.
What is a deferral?