Chapter One
A system of...
What is accounting?
These are what a business OWNS.
What are assets?
The accounting basis where revenues and expenses are recorded when cash is exchanged.
What is cash basis accounting?
What is a contra-asset?
The three "things" that accounting fraud requires.
The decision makers in financial accounting.
What is external? (banks, government, investors, etc)
These are what a business OWES.
What are liabilities?
The accounting system where revenues are recorded when earned and expenses when incurred.
What is accrual based accounting?
What is i = prt?
The actions we take to reduce opportunity, and therefore fraud.
What are internal controls?
These are recorded when they are used up.
What are expenses?
These are the three normal debit accounts.
What are dividends, expenses, and assets (DEA)?
The type of account unearned revenue is.
What is a liability?
A ski resort sold $100,000 in season tickets before the skiing season started. These tickets are good for the months of November through February. Record the adjusting entry for the end of the year.
What is unearned revenue debited 50,000 and sales revenue credited 50,000.
Short term, highly liquid investments that will mature in less than three months.
What are cash equivalents?
This is what GAAP stands for.
What is generally accepted accounting principles?
The effect on the accounting equation when cash is received for distribution of stock.
What is assets increase and stockholder's equity increases.
The journal entry for a customer paying $400 for a service that has not yet been provided.
What is cash debited 400 and unearned revenue credited 400?
These are the three accounts that we close at the end of the year.
What are revenues, expenses, and dividends?
The five types of internal controls.
What are establish responsibility, restrict access, segregation of duties, document procedures, and independently verify?
These are the advantages to being incorporated.
What is limited liability, ease of transfer of ownership, and ability to raise capital.
Record the journal entry for purchasing a $24,000 piece of equipment on account.
What is PPE debited 24,000 and accounts payable credited 24,000?
You deposit $100,000 in a savings account on Dec 1 that earned 6% annually. It is paid out quarterly. Record the adjusting entry for Dec 31.
What is interest receivable debited 500 and interest revenue credited 500.
The accounts that cause an increase to the book in bank reconciliations.
What are interest and EFTs?