Three's Company
Name the three principal differences between corporations and proprietorships/ partnerships:
Different accounts for equity, different methods to distribute earnings, corporations pay taxes on biz. earnings.
What categories of account(s) can a prepaid expense be?
Asset or contra-liability
What is the adjustment for Notes Payable?
DR Interest Expense; CR Interest Payable
How do you correct unacceptable percentages for FIT?
none
Stock of other companies?
investments
What are three groups of people for whom financial statements are prepared?
Managers, Stockholders, Creditors, Government
Name three expenses that are adjusted as accruals.
Interest, salaries, income tax
What is the adjustment for Notes Receivable?
DR Interest Rec.; CR Interest Income
Name one section of the corporation annual report:
Management’s Analysis & Discussion, financial statements
Gain/Loss on Sale of assets?
other revenue/expenses
What is the long-term assets category often called?
PPE (property, plant, equipment)
What do the terms accrue and defer mean?
To accumulate or amass and to delay
In what order are adjustments done?
the order they appear on the worksheet
Interim financial statements are what?
Statements provided during the year so users can make decisions
Where is land (under our building) categorized?
PPE (property, plant, and equipment)
What are the three factors needed to compute interest?
Principal, rate, term (time)
What are three examples of unearned revenue?
(rent, airline tickets, season tickets, annual subscriptions, deposit on a catering job to be performed, etc)
What is the adjustment for rent $ received and recorded as revenue by the landlord but not yet earned?
CR Unearned Rent; DR Rent Income
If unearned revenue is not adjusted, what is the effect on net income?
Too low because you’re missing revenue
Name three examples of Other Revenues & Expenses.
Gain on Sale; Loss on Sale; Interest Income, Interest Expense
What are the three measures of liquidity?
Current ratio, quick ratio, working capital
What is the danger of not using reversing entries?
Interest could be reported twice: as an accrual from the previous year and again in the new year
What is the adjustment for Salaries earned but not paid?
DR Salaries Exp; CR Sal. Pay
What is the formula for what appears on the Statement of Stockolders’ Equity?
Beg. Balance + Common Stock Issued + Net Income – Dividends = Ending Balance
What are two accounts that might be classified as Investments?
Land for future purposes and stock in other companies