Practice Problems
You purchased supplies with cash. What is the CREDIT account?
Cash
Name one noncurrent asset account
PPE: plant, property, equipment, furniture, ect.
When are adjusting journal entries made?
End of the quarter/period/year
When are closing entries made?
End of the quarter/period/year
The formula for the balance sheet
Assets = Liabilities + Equities
You paid for rent in advance with cash. What is your DEBIT account?
Prepaid Rent
Your debits must ALWAYS _____ your credits
Equal
Which basis of accounting is used in this class?
Accrual basis accounting
Give one example of a permanent account
Any balance sheet accounts: assets, liabilities, and equities.
The main difference between financial accounting and managerial accounting
financial reports to external users, managerial reports to internal users
If we have a net income of $200, beginning retained earnings of $200, and paid out dividends for $100, what is our ending retained earnings?
$300
Name the 5 current assets we have learned about
Cash, receivables, inventory, supplies, and prepaids
This account is never adjusted when doing adjusting journal entries
Cash
Give two examples of a nominal (temporary) accounts
Any income statement accounts (revenues, expenses) (dividends count)
beginning retained earnings + net income - dividends = ending retained earnings
You issued 500 shares of common stock with a par value of $1 and received $600 from investors. What is your additional paid in capital (APIC)?
$100
The account used when common stock is sold for higher than its par value.
Additional Paid in Capital (APIC)
Which two accounts are always affected by adjusting journal entries?
An income statement account and a balance sheet account.
What is the formula for finding the working capital?
The three forms of business organization
1. Sole proprietorship
2. Partnership
3. Corporation
On Jan.1 you purchased insurance with cash. On Dec.31 you have used up all of the prepaid insurance. What is your DEBIT account on December 31st?
Insurance Expense
An increase in revenues would cause an increase or decrease in equities?
Increase
Under accrual basis accounting, when do we recognize transactions?
When the transaction that caused them occurs. (When the performance obligation is satisfied.)
What is the formula for finding the current ratio?
current assets / current liabilities
The correct order of the 3 financial statements
1. Income statement
2. Statement of Retained Earnings
3. Balance Sheet