Accounting basics
Accounting is often called the “_____ of business.”
language
The principle that says record revenue when it’s earned.
Revenue Recognition Principle
The basic accounting equation
Assets = Liabilities + Equity
Assets normally have this type of balance
debit balance
Which statement shows revenues and expenses?
Income Statement
Name one external user of accounting information.
shareholders, lenders, or regulators
The principle that matches expenses with revenues in the same period
Matching (Expense Recognition) Principle
Equity is increased by these two things
common stock and revenues
Liabilities normally have this type of balance.
Credit balance
The correct order of preparing financial statements.
Income Statement → Statement of Retained Earnings → Balance Sheet → Statement of Cash Flows
The three parts of the Fraud Triangle.
opportunity, pressure, and rationalization
The assumption that a business will continue operating
Going Concern Assumption
Equity is decreased by these two things
dividends and expenses
Which side of a T-account are debits recorded on?
Left side
The statement that explains changes in retained earnings.
Statement of Retained Earnings
This U.S. organization sets GAAP.
FASB
Information must be reported if it could influence user decisions
Materiality Constraint
If a company buys $7,100 of supplies on credit, which accounts increase
Asset: Supplies
Liability: Accounts Payable
If cash is paid for rent, what happens to Cash and Rent Expense?
Rent Expense increases (debit), Cash decreases (credit)
The balance of retained earnings flows into which statement?
Balance Sheet
The global standard-setting body that issues IFRS.
IASB
The assumption that separates business records from the owner’s
Business Entity Assumption
If a business pays a $200 cash dividend, how is equity affected
Equity decreases by $200
The rule of double-entry accounting.
debits must equal credits
Which financial statement shows a company’s cash inflows and outflows?
Statement of Cash Flows