Financial Accounting
What is accounting?
Accounting is the recording of financial transactions and the storage, classification, retrieval, aggregation and presentation of the results in various reports and analyses.
What is the difference between an invoice and a voucher?
What is an expense?
Refers to the money spent and costs incurred by a company in pursuit of revenue
What is the difference between a debtor and a creditor?
The creditor is the one who lends money in a credit relationship, and the debtor is the one who borrows it
What's the meaning of Debit?
The debit side records all funds flowing into the account
Is income tax an expense or a liability?
Tax amounts reported in the financial statements are determined in accordance with generally accepted accounting principles. In an income statement, they constitute an expense in the calculation of profit and loss for a particular period. On the balance sheet, taxes represent liabilities that affect the value of the organization
What is accounts payable?
When an enterprise purchases goods on credit and needs to recover them within a short period of time, it is called accounts payable. It is considered a liability and is a "current liability"
What is income?
Refers to the amount of money, property and other transfers of value received in exchange for services or products over a certain period of time
What is owner's equity?
Assets = Liabilities + Owner's Equity. Owner's equity represents the owner's investment in the business minus the owner's draws or withdrawals from the business plus net profits (or less net losses) since the business began
What is a credit balance?
A credit balance on your billing statement is an amount that the card issuer owes you.
What is the difference between revenue, income?
“revenue” refers to the total amount of money a company generates before removing any expenses. “Income”, on the other hand, is equal to revenues minus the costs of doing business, such as depreciation, interest, taxes, and other expenses.
What is a liability account?
A liability account is a category in a business' books that shows how much it owes.
What does the income statement represent？
The statement displays the company's revenue, costs, gross profit, selling and administrative expenses, other expenses and income, taxes paid, and net profit in a coherent and logical manner.
What is Double Declining Balance Depreciation?
Depreciation charges are faster early in an asset's life, but slower later. The total depreciation expense over the life of the asset will be the same.
How do you record the sales tax on the purchase of an asset?
Define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use.
What is a financial statement?
A financial statement is a report that shows the financial activities and performance of a business. It is used by lenders and investors to check a business's financial health and earnings potential.
What are current liabilities example?
Accounts payable or trade payables, notes payable due within one year, the principal portion of a long-term loan that must be repaid within one year, wages payable, income tax payable, interest payable, other accrued expenses, deferred revenue and customer deposit
What is the Net Income?
Net income is the money you take home after taxes and deductions are deducted from your paycheck
How are balance sheets and income statements related?
Revenue and earnings lead to increased owner (or stockholder) equity
Expenses and losses that reduce owner (or shareholder) equity
Where is the discount on the purchase of office furniture recorded?
A discount for the purchase of office furniture used by the company (such as furniture and fixtures or office furniture) is recorded in the same asset account in which office furniture is recorded. A discount is a reduction in the cost of the asset.
How does revenue affect the balance sheet?
The increase in assets also results in an offsetting increase in the shareholders' equity portion of the balance sheet, and retained earnings will increase
What are invoice payment terms?
Invoice terms or payment terms mean the time when payment is due relative to the date of delivery of goods or services or the date of delivery of an invoice for those goods or services.
If a mortgage payment is due by December 31, but the payment is not made until the following month, should the loan payment be accrued at December 31?
There needs to be an adjusting entry dated 12/31 debiting interest expense and attributing interest due to the amount of interest owed as of 12/31.
On January 1 Year 1, Missouri Co. purchased a truck that cost $30,000 . The truck had an expected useful life of 10 years and a $3,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double-declining balance method is:
$4800
What is the removal entry for equipment sold before it is fully depreciated?
1. Record depreciation expense as of date of disposal
2. Record the cash received, net of the cost of the equipment and the latest accumulated depreciation, and record the resulting profit or loss