Accounting Basics
What is the accounting equation?
Assets = Liabilities + Equity
Which financial statement shows revenues and expenses?
Income Statement
A Payable is this type of account with this Normal Balance
Liability and Credit Balance
Give an example of an accrued revenue.
Services performed but not yet billed
This is ratio is used to measure the risk associated with a company's use of liabilities.
Debt Ratio
Name the 3 Temporary Accounts that are closed.
Revenues, Expenses, Dividends
What does GAAP stand for?
Generally Accepted Accounting Principles
Cash inflows from OA was $50,000, outflows from IA was $15,000 and Inflows from FA was $10,000. Net change in cash is?
$45,000
What is the purpose of an unadjusted trial balance?
To verify debits = credits before adjustments
Record the adjustment: $500 of unearned service revenue has now been earned.
Debit Unearned Revenue $500; Credit Service Revenue $500
Liabilities / Assets
A truck depreciates $5,000 this year, what is transaction at end of year?
Debit Deprecation Expense $5,000
Credit Accumulated Deprecation $5,000
If a company buys equipment for cash, which two accounts change?
Equipment increases (asset), Cash decreases (asset)
Determine Net Income:
Rent Expense: $20,000
Salary Expense: $50,000
Cash: $50,000
Accounts Payable: $35,000
Consulting Revenue: $100,000
$30,000
Salaries Expense is what type of account and carries what type of normal balance?
Equity, and Debit Balance
On July 1st, We paid $1200 for a one year insurance premium. What will insurance expense list at year end on income statement?
$600
This ratio measures a company's short-term financial health
Current Ratio
I paid myself $5,000 in dividends, what is the closing entry?
Debit IS and credit Dividends $5,000
What are the three main elements of equity in the expanded accounting equation?
in the expanded accounting equation?Common Stock, Dividends, Retained Earnings (Revenues – Expenses)
The process to go from transactions and events to financial statements begins with:
A) Identifying and analyzing each transaction
B) Recording relevant transactions
C) Post to ledger
D) prepare trial balance
A) Identifying and analyzing each transaction
Analyze → Journalize → Post → Trial Balance → Adjust → Statements → Close
These steps are commonly referred to as:
The Accounting Cycle
I rented a building to another company on July 1st for $500 a month on a 1-year lease, but collected the entire $6,000 on July 1st. What is adjustment on Dec. 31?
Debit Unearned Rev and credit Rent Revenue $3,000.
I have current assets of $90,000, long-term assets of $120,000, current liabilities of $40,000 and long-term liabilities of $37,000. What is current ratio?
2.25
A car is bought for $20,000 and has a useful life of 5 years and a salvage value of $5,000. What will depreciation be recorded at after 1st year? What will book value of car be after year 2?
$3,000
$14,000
Net Income = $50,000
Retained Earnings = $120,000
Dividends = $10,000
What is new balance of retained earnings
$160,000
Explain difference between OA, IA and FA
Explain how the trial balance could possibly not balance
Debiting or crediting 2 accounts, wrong number, etc.
On Oct 1, I loaned a company $100,000 at 10% interest but will not collect until March 1 the following year. What is transaction on Dec 31?
Debit Accounts Receivable, Credit Interest Revenue $2500
I have a net income of $4,000 and net sales of $10,000. What is my profit margin?
40%
A company has Revenues of $20,000, Expenses of $15,000, and Dividends of $2,000. Calculate ending retained earnings if beginning retained earnings = $10,000.
$13,000