Exam 1
Is building an asset, liability or equity?
Asset
Is accounts payable an asset, liability or equity?
Liability because it has “payable” in it
The balance sheet formula is Assets = Liability + Equity. True or false?
True! The balance sheet formula is Assets = Liabilities + stockholders Equity which can also be written as A-L=S
Is common stock an asset, liability or equity?
It is equity! Part of stockholders equity it has the word stock in it
The formula for income statement is Revenues - expenses which equals net income.
Asset has normal debit balance. Refer to acronym DC ADE LER.
Debit. Credit
Assets ⬆️D⬇️C Liabilities ⬆️C⬇️D
Dividends ⬆️D⬇️C Equity ⬆️C⬇️D
Expenses ⬆️D⬇️C Revenue⬆️C⬇️D
There are 5 closing accounts. True or false
False there are 3 accounts.
The three closing accounts are revenues, equity, and dividends. True or false?
False it’s revenues, expenses and dividends. The closing process reduces revenue, expense, and dividends account balances (temporary accounts) to zero so they are ready to receive data for the next accounting period.
Two accounts that decrease stockholders equity are expenses and dividends? True or false
True! Expenses and dividends decrease stockholders equity because the total amount of cash distributed by cash dividends is charged against, and reduces, the retained earnings of the company, and thus decreases stockholders' equity.
The statement of retained earnings formula is beginning RE + net income - dividends = ending RE? True or false ?
True! This is the correct formula u must memorize!
Unearned revenue is an equity account? True or false
False it is actually a liability because it is revenue that has not been earned yet which is why we do not count for it and anything we do not account for becomes a LIABILITY!!!!
Prepaid expense is an asset account. True or false ?
Three types of internal control are motive, rationalization and opportunity. True or false ?
True! These are three types of internal controls. The primary purpose of internal controls is to help safeguard an organization and further its objectives. Internal controls function to minimize risks and protect assets, ensure accuracy of records, promote operational efficiency, and encourage adherence to policies, rules, regulations, and laws.
The weakest internal control is motive. True or false?
False! It is opportunity because a person who wants to commit fraud has the opportunity to commit it which is the most weakest internal control.
What is the quick ratio formula?
Cash + accounts receivable+ short term investments / current liabilities
What is gross profit formula?
Sales revenue - cost of goods sold
What is sarbanes oxley?
It is a law or regulation stating companies should have strong internal control.
Fraudulent financial reporting is when employers commit theft. True or false?
False. Fraudulent financial reporting is when managers, CEO, CFO commit fraud such as managers trying to make income look better than it is
A Walmart employee steals a bag of chips during his duty break. Is this misappropriation of assets or fraudulent financial reporting?
What is journal entry for bank errors ?
No journal entry required. Remember for the acronym DOE (deposit in transit, outstanding checks, bank errors) on the bank side there’s no JE required because we do not record on bank side.
What is cost of goods sold formula?
Beginning inventory + purchases - ending inventory
What is gross profit percentage formula ?
gross profit / sales revenue
Cost of goods sold is an expense account. True or false ?
True because Because COGS is a cost of doing business, it is recorded as a business expense on the income statements. It is also on the income statement and income statement formula has expense in it.
If a bookkeeper mistakenly reported a $28 deposit as $82, the error would be shown on bank reconciliation as..?
-54. U get this by the formula : actual amount - error amount.
(28-82 = -54)
What is FOB shipping point?
It is when you recognize revenue when goods are leaving the shipping dock.