Chapter 1
Chapter 2
Chapter 3
Chapter 4
100
Assets that have no physical substance. An example is goodwill.
Intangible Assets
200
Assets = Liabilities + _________
Stockholders' Equity
200
Give me an example of an asset, liability, and stockholders' equity.
Asset- Cash, Accounts Receivable, Inventory, PPE (land, buildings, equipment), notes receivable, etc.
Liability- notes payable, accounts payable, salaries and wages payable, interest payable, etc.
SE- common stock, retained earnings
200
What are the two principles used as guidelines in accrual basis accounting? What do they mean?
The revenue recognition principle requires that revenue be recognized in the accounting period in which the performance obligation is satisfied
The expense recognition principle requires that expenses be matched with revenues.
300
what is the expanded accounting equation
300
Define solvency. How is it computed? Is it better if it is higher or lower?
Solvency is the ability of a company to pay interest as it comes due and to repay the balance of debt due at its maturity.
Debt to Assets Ratio = total debt(liabilities) / total assets
The lower the ratio the better. A high percentage indicates a risky company.
300
What accounts have a normal debit balance? What accounts have a normal credit balance?
Normal debit balance is Expenses, Assets, and Dividends
Normal credit balance is Liabilities, Common Stock, Retained Earnings
300
what are the steps of the accounting cycle?
1) analyze business transactions
2) journalize the transactions
3) post to the ledger accounts
4) prepare a trial balance
5) journalize and post adjusting entries: deferrals/accruals
6) prepare an adjusted trial balance
7) prepare financial statements
8) journalize and post closing entries
9) prepare a post-closing trial balance
400
What is the correct order in which you prepare the financial statements?
Income Statement, Retained Earnings Statement, Balance Sheet, and Statement of Cash Flows
400
What is the set of rules and practices that provide answers to the following questions.
1) How does a company decide on the type of financial information to disclose?
2) What format should a company use?
3) How should a company measure assets, liabilities, revenues, and expenses?
Who is the U.S. standard-setting body that establishes these and similar principles.
Generally Accepted Accounting Principles (GAAP)
Financial Accounting Standards Board (FASB) established these principles
400
On October 2, Sierra received a $1,200 cash advance from R. Knox, a client, for guide services for multi-day trips that are expected to be completed in the future.
Dr. Cash 1,200
Cr. Unearned Ser. Rev. 1,200
400
What is the difference between temporary and permanent accounts? What are the accounts that get zeroed out at the end of the month?
Temporary accounts are the accounts that get zeroed out at the end of the month, they get closed. These include all revenue accounts, all expense accounts, and dividends.
Permanent accounts don't get closed. These include balance sheet accounts (assets, liabilities, SE)
500
what is the purpose of the income statement? statement of retained earnings? balance sheet? and statement of cash flows?
Income statement - provide financial information to investors and creditors on whether the company is profitable
Statement of retained earnings - enables users to evaluate dividend payment practices
Balance sheet - displays what the company owns and owes
Statement of cash flows - provide a detailed picture of what happened to a business's cash during a specified period
500
Define and explain one of the principles used in financial reporting.
Measurement principles - GAAP generally uses one of two measurement principles: the cost principle or the fair value principle
Historial cost principle - requires assets to be recorded and reported at original cost because that amount is verifiable
Fair value principle - requires that some assets and liabilities should be reported at fair value (the price received to sell an asset)
Full Disclosure Principle - requires that all circumstances and events that would make a difference to financial statement users should be disclosed
500
What is the purpose of a trial balance? If the debits equal the credits in the trial balance, will the financial statements necessarily be error-free? Why or why not?
The primary purpose of the trial balance is to prove the mathematical equality of debits and credits after posting.
It may balance but not uncover all errors such as: a transaction that should have been journalized but was not recorded, a journal entry posted twice, or incorrect accounts used in journalizing or posting.
500
What would the adjusting entry be for this transaction:
Insurance expires at the rate of $450 per month.
Dr. Insurance expense 450
Cr. Prepaid insurance 450