Accounting Basics
Assets = Liabilities + Equity
What is the Accounting Equation?
These are resources a company owns or controls and are expected to yield future benefits.
What are assets?
This statement contains Revenue - Expenses.
What is an Income Statement?
These identify and describe transactions and events entering the accounting system.
What are source documents?
The normal balance side is Debit for these three categories.
What are Assets, Dividends and Expenses?
(ADE)
Accumulated depreciation is this type of account.
What is a Contra Asset account?
Joe Company receives $10,00 cash in advance of providing consulting services.
What is Debit Cash, Credit Unearned Revenue?
These are the concepts and rules Financial Accounting is governed by.
What are Generally Accepted Accounting Principles or GAAP.
These are the owner's claim on assets.
What is equity?
This statement has a beginning balance plus net income less dividends = ending balance.
What is the Statement of Retained Earnings?
This is a record of increases and decreases in specific asset, liability, equity, revenue or expense.
What is an account?
The normal balance side for these three categories is Credit.
What are Liabilities, Common Stock and Revenues?
These are costs incurred in a period but are unpaid and unrecorded.
What are Accrued Expenses?
Joe Co. collected $500. cash for services previously billed.
What is Debit Cash, Credit Accounts Receivable?
Accounting Information is based on actual cost in cash or equal to cash basis.
What is the Measurement (cost) principle?
This occurs when revenue exceeds expenses.
What is net income?
This statement has Assets = Liabilities + Equity.
What is a balance sheet.
This is a record of all accounts used by a company.
What is a ledger?
Student use these accounts named after the 20th letter of the alphabet.
What is a T-account?
We make these for transactions and events that extend over more than one period.
What are Adjusting Entries?
Moe Co. records accrued salary expense at the end of month.
What is Debit Salaries Expense, Credit Salaries Payable?
This is recognized when goods or services are provided to customers.
What is revenue? (Revenue recognition principle)
This occurs when expenses exceed revenue.
What is net loss?
Financial Statements provide information for this type of user.
What is an external user?
This is an asset account form prepayments of future expenses. An example would be rent or insurance.
What are prepaid accounts?
When journalizing (posting) a transaction this entry is always first.
What is a debit?
This type of financial statement differentiates between current and longterm assets and liabilities.
What is a Classified Balance Sheet?
Mr. Moe of Moe Co. invested $18,000 in cash and $2,000 worth of Equipment in exchange for common stock.
What is Debit Cash $18,000, Debit Equipment $2,000 and Credit Common Stock $20,000.
(This is known as a compound entry)
These are recognized (or recorded) during the same time period as the revenue reported.
What are expenses? (Matching principle)
These are creditors claims on assets.
What are liabilities?
This statement lists cash flows from operating, investing and financing activities.
What is the statement of cash flows?
This is a liability that is settled in the future when a company delivers its products or services.
What is unearned revenue?
This is a list of all ledger accounts and their balances at a point in time.
What is a trial balance?
Net Income divided by Net Sales equals this.
What is Profit Margin?
Joe of Joe Co. billed a customer $750. for services rendered.
What is Debit Accounts Receivable and Credit Service Revenue?