Income Statement
The principle that states revenues should be recognized when earned is?
Revenue Recognition Principle
When are adjusting entries prepared?
End of Accounting Period
When are closing entries prepared?
At the end of the fiscal year
Record the following journal entry:
Bill and Ted's Inc. collected $4,000 for services provided.
Cash $4,000
Service Revenue $4,000
What is the formula for Net Profit Margin?
Net Income / Total Revenues
What type of accounting method records revenues when cash is received?
Cash Basis Accounting
What is the purpose of adjusting entries?
To ensure all items are recorded at the correct values and in the correct periods
Closing entries are created to close what type of accounts?
Temporary Accounts
Record the following journal entry:
Mr. Frost bought $3,000 of new supplies. He paid cash for 1/3 of them and bought the rest on account.
Supplies $3,000
Cash $1,000
Accounts Payable $2,000
Which of the following is not found in the chart of accounts:
Sales Revenue
Travel Expense
Net Income
Interest Payable
Net Income is not an account-it is a formula to determine profitability
What is the only method of accounting for income accepted by GAAP?
Accrual Basis Accounting
What are the two types of adjusting entries?
Deferral and Accrual
What is created after all closing entries have been made.
Post-Closing Trial Balance
At December 31 2018, Duhawks Inc. has an unadjusted balance in Prepaid Rent of $24,000 and Rent Expense of $0. Their contract states that monthly rental payments are $1,000. What is the adjusting entry needed for the year 2018.
Rent Expense $12,000
Prepaid Rent $12,000
What type of account is accumulated depreciation?
Contra-Asset
What would the following information's effect on Retained Earnings be?
Expenses: 17
Revenues: 28
Unearned Revenue: 12
Increase by $11
(Revenues - Expenses)
What are deferral adjustments?
Recognizing an expense or revenue that had been postponed to later
Describe the two entries made in order to "close the books".
1. Debit all revenue accounts, credit all expense accounts, and post the difference to retained earnings. Closes out all income statement accounts.
2. Debit to Retained Earnings and Credit to Dividends to close out the Dividends account
Record the adjusting entry for depreciation for the month of February. Depreciation is estimated at $800 per month.
Depreciation Expense $800
Accumulated Depreciation $800
A prepaid asset is something that has been paid for but has not been used. Making a deferral entry related to a prepaid asset recognizes what on the income statement?
Expense
What is the journal entry to record the following:
ABC Company received $500 from customer XYZ on 1/31/19 for $300 worth of services completed in January and the remainder to be completed in February.
Cash $500
Services Revenue $300
Unearned Revenue $200
What are accrual adjustments?
What are the two reasons closing entries are made?
1. Establish zero balances for all temporary accounts in order to prepare for the new year.
2. Transfer net income (or loss) from the income statement to Retained Earnings.
On January 17, Hammers and Nails received payments of $10,000 for a project to be done in February. Record the entry for the receipt of cash and the adjusting entry at the end of February when all work is completed.
1-17 Cash $10,000
Deferred Revenue $10,000
2-28 Deferred Revenue $10,000
Service Revenue $10,000
What are the steps of the accounting cycle from start to finish?
Analyze
Record - JE, T-Accounts, Unadjusted Trial Balance, Adjustments, Adjusted Trial Balance
Summarize-Financial Statements
Closing Entries
Post-Closing Trial