Revenues
the total amount of money a business or government brings in from selling goods, services, or collecting taxes, before any expenses are subtracted
What is Revenues?
outflow of money or a cost incurred to buy goods, pay for services, or run operations
What is Expense?
formula that makes up accounting equation and balance sheet
What is A = L + OE
The formula to find net income is __?
What is Revenues - Expenses?
Antifraud legislation passed after repeated incidents in early 2000s
What is Sarbanes-Oxley?
Revenues make __ go UP (on the balance sheet)
What is Owners Equity
We know it's okay to write expenses when:
What is 1. when we record revenues and 2. when you receive g/s
Ease at which an asset can be converted to cash
Liquidity
If there is an increase of expenses on the income statement, the effect on the balance sheet will be __?
What is Owner's Equity go down?
Internal and External __?
What are the two forms of Audits?
The two circumstances that must exist to record revenue:
What are 1. must had provided g/s and 2. must receive payment or promise to pay
The two industry exceptions to the matching principle are:
What is marketing and research and development?
item on balance sheet expected to be used within 1 year vs longer than 1 year
What are current and non current assets?
If the balance sheet shows position of a company, the income statment shows a companies__?
What is performance?
Never allowing use of a city/company's credit card for personal use
What is an example of a written policy and procedure?
A key part of recording revenues and expenses is NOT HOW MUCH to write down but ___?
What is WHEN TO WRITE IT DOWN?
Receiving money ($) before you have earned it
What is advance from a customer?
The cumulative profits a business keeps rather than paying out as dividends to shareholders
What are retained earnings?
A company is reviewing its income statement for the month of May, it sees the payment for Junes rent was written down as a May expense. Explain why this is incorrect.
What is matching principle? - June rent expense should be recorded in June when the expense is incurred, not in May when it is paid.
To divide job tasks up and responsibilities among multiple people to prevent fraud and errors
What is Segregation of Duties?
Tom's Shoe Shop had the following revenues for the month of October:
• Service Revenue: $9,500
• Interest Revenue: $200
Tom was paid $300 in November for shoes he delivered in October. Explain this event's effect on Tom's financial statements --> how would the revenues be reported if he was given payment in October?
What are revenues = $9,200?
- even though Tom wasn't paid until November, his products were delivered, therefore earned, in October --> total Oct revenues = $9,500
October's utilities bill consisted of $350. $200 was paid in September and the remaining $150 would be paid in October. What is the effect on October's income statements?
What is: October Income Statement expense = $350
Formula that connects the balance sheet items to income statement
What is Beg RE + NI - dividends = End RE
A company has the following information for September:
Sales Revenue: $8,000
Interest Revenue: $500
Rent Expense: $1,500
Wages Expense: $2,000
Utilities Expense: $500
What is NI, how do you find?
What is $4500? --> Total Rev - Total Expenses = NI
The five key practices of accounting control systems:
What are written policies and procedures, clear lines of authority, restricted areas, segregation of duties, and internal/external audits?