Key Concepts
This is the basic accounting equation.
What is assets = liabilities + equity?
Property and Equipment
What is a debit?
The allowance for doubtful accounts is this type of account.
What is a contra-asset?
This is the term for accumulated net income that has not been distributed to owners in the form of dividends.
What is retained earnings?
This is a process by which the cost of property and equipment is allocated to the expense over the time periods which benefit from the use of the asset.
What is depreciation?
This term refers to a transaction that occurs on the right side of the T-account.
What is a credit?
Retained Earnings
What is a credit?
This is the term for cash that has been collected and recorded by a company but which has not yet been reflected on the bank statement.
What is a deposit in transit?
This term refers to the date on which all outstanding principal and interest on a note payable is due.
What is the maturity date?
If a computer is purchased for $3,000 and is expected to be used for five years with a residual value of $500, this is the amount of accumulated depreciation that will be reported at the end of year two.
What is $1,000?
This list of all active accounts and their balances at a particular date is used to prove out the equality of debits and credits.
What is the trial balance?
Deferred Revenue
What is a credit?
When preparing a bank reconciliation, this type of transaction is always subtracted from the bank statement balance.
What is an outstanding check?
If a company has assets of $400,000, liabilities of $100,000, and retained earnings of $200,000, how much is total stockholders' equity?
What is $300,000?
This inventory cost flow method assigns the cost of the most recent items purchased to ending inventory.
What is FIFO?
The liquidity ratio that divides current assets by current liabilities is called this.
What is the current ratio?
Dividends
What is a debit?
Work in process, finished goods, and raw materials are all examples of this general asset account.
What is inventory?
On June 1, a company received $24,000 for future consulting services to be performed evenly over the next 12 months. Service revenue of $2,000 is earned each month. On December 31, this amount will be reported as deferred revenue on the balance sheet.
What is $10,000?
During periods of decreasing purchase prices, this inventory costing method will yield the lowest cost of goods sold.
What is LIFO?
The revenue recognition principle says that revenue should be recognized when this term has occurred.
What is earned?
Accumulated Depreciation
What is a credit?
Beginning accounts receivable were $500,000, and ending accounts receivable were $400,000. Assuming cash collections totaled $800,000, what were total credit sales?
What is $700,000?
Failure to recognize accrued wages at the end of the year would result in this balance being overstated.
What is net income?
or
What is retained earnings?
This term refers to the cost of an asset less its accumulated depreciation.
What is book value?