Unit 1
33. What is the accounting equation?
Assets = Liabilities + Equities
18. List the types of accounts.
Assets, Liabilities, Equities, Revenues, Expenses, Gains/Losses
8. What side does debit go on when recording a transaction? Credit?
dr= left, cr= right
1. List the financial accounting systems.
cash basis, accrual basis, accrual-adjusted approach
1. What are the four statements
Income statement, state of owner equity, balance sheet, cash flow statement
5. Useful financial statements are________, __________, and __________.
3. This courses uses the coding system from the ________.
FFSC
15. What is Accumulated Depreciation? What type of account is it?
Contra-asset, the depreciation accumulated by an asset over a period of time
Which accounting system records a transaction when cash is received?
Cash-basis
Define Original Cost.
Original Cost is the purchase price of an asset plus any other costs in preparing the item for use (e.g., shipping).
2. What is the role of accounting?
The role of accounting is to provide information for good financial management
13. True or False. The journal is very similar to the ledger and keeps track of the farm’s financial transaction in chronological order.
False. The journal is separate from the ledger and keeps track of the farm’s financial transaction in chronological order.
7. Financing includes what types of account? Investing? Operating?
Financing- Liabilities and Equities
Investing- Assets
Operating- Expenses and Revenues
What is an adjusted trial balance?
a trial balance that includes all of the accounts used by the farm business during the year, including the accounts needed for adjusting journal entries.
Define Base Value.
Base Value is the amount of depreciation allowed over an asset's useful life. It is calculated as Original Cost minus Salvage Value.
17. What group developed the standardized procedures of farm accounting?
Financial Accounting Standards Board (FASB)
True or False. Debits are always decreasing, and credits are always increasing.
False
What is the difference between Interest Payable, and Interest Expense?
Interest Payable
Interest Expense
Accrual basis is simple, but more accurate.
Accrual basis is more complicated, but more accurate.
What is the purpose of the income statement?
Measures financial performance
35. Which scenario is an operating activity?
a.Farmer purchases feed for the farm.
b.Bill gets a loan from the bank.
c.Frank buys a tractor for his farming operation.
a.Farmer purchases feed for the farm.
9. Transactions Analysis has three steps, what are they?
1. A financial transaction occurs.
2. Determine which account (at least two) are affected.
3. For each account, determine if the balance increased or decreased
On March 1, Steve decides to buy a tractor for 60,500 and they need a loan to make a purchase. Their lender agreed to lend them the money. The loan is for 1 year and has 7% annual interest rate. (No interest to consider on the day you pay it back.)
Date Account. Dr. Cr.
3/1 Cash $60,500
Notes Payable Due Within One Year $60,500
*Took out loan to purchase tractor
How is the accrual-adjusted approach different from the other accounting systems?
1.Adjustments occur at the end of the year: Thus, the events that occurred during the year are accounted for.
2.Only one adjustment: Rather than the continual adjustments of the accrual-basis system for accounts like Accounts Receivable, only one adjustment will be needed under the accrual-adjusted approach.
3.Inventory: The accrual-adjusted approach allows for inventory to reported, just as it is under the accrual-basis. Cash-basis accounting reports no inventory.
4.The accrual-adjusted approach reports journal entries for receipts and payments of cash the same as the cash-basis system, but then adds adjustments to approximate the accrual-basis system.
12. What is the purpose of the cash flow statement?
Summarizes the companies cash management, only examines cash transactions from cash ledger, examines the cash management activities of a business, reports on all cash transactions