What is the statement of retained earnings equation?
Beginning Retained Earnings (1/1/15):
Add Net Income or Minus Net Loss:
Minus Dividends:
Ending Retained Earnings (12/31/15):
100
The purpose of AJE.
To assign revenues and expenses to the proper period
100
The purposes for doing closing journal entries
1. To close temporary accounts
2. To update retained earnings
100
(blank) are usually only made once a year, so temporary accounts accumulate information for the full year.
What are Closing Journal Entries?
100
At year end all equity accounts must be closed.
False. What accounts are closed?
200
The income summary has debits of $85,000 and credits of $75,000. The company had a net income or net loss of how much?
Net loss of $10,000.
200
Which type of AJE is this:
You pay for an asset now. And use it up later.
Give an example.
Converting assets to expenses. Examples vary.
200
What is the 1st step in the CJE process?
Give the debits and credits (journal entry).
To close revenues to income summary.
Revenue Debit
Income Summary Credit
200
(blank) is a liability and should appear on the balance sheet.
What is Unearned Revenue?
200
T/F - The current ratio is a measure of short-term debt paying abilities.
True
300
The normal balance of Accumulated Depreciation is:
Credit
300
Which type of AJE is this:
You earn the service now. And receive the money later.
Give an example.
Accruing uncollected revenues. Examples vary.
300
What is the 2nd step in the CJE process?
Give the debits and credits (journal entry).
To close expenses to income summary.
Income Summary Debit
Expenses Credit
300
The balance in the account shows how much the related asset has been written off since it was purchased by the company.
What is the Accumulated Depreciation?
300
T/F - The period of time which the cost of an asset is allocated to depreciation expense is called its useful life.
True. How do you calculate depreciation expense?
400
T/F - Prepaid expenses are assets that should appear on the income statement.
False. Which financial statement should they appear on?
400
Which type of AJE is this:
You receive the money now. And earn or provide the service later.
Give an example.
Converting a liability to a revenue. Examples vary.
400
What is the 4th step in the CJE process?
Give the debits and credits (journal entry).
To close dividends to retained earnings.
Retained Earnings Debit
Dividends Credit
400
Land is not considered a(n) (blank) even though it is long term in nature.
What is the depreciable asset?
400
T/F - The income summary account appears, as stated, on the statement of retained earnings.
False. Does it appear on a financial statement?
500
Vocab - A(n) (blank) is used during the financial statement preparation in order to bring multiple steps of the accounting process onto one sheet of paper.
What is a worksheet?
500
Which type of AJE is this:
You use up or incur the expense now. And pay it off later.
Give an example.
Accruing unpaid expenses. Examples vary.
500
What is the 3rd step in the CJE process?
Give the debits and credits (journal entry) for Net Income and Net Loss.
To close income summary to retained earnings.
With Net Income:
Income Summary Debit
Retained Earnings Credit
With Net Loss:
Retained Earnings Debit
Income Summary Credit
500
Notes on the financial statements result because of the generally accepted accounting principle related to (blank).
What is adequate disclosure?
500
T/F - The book value of a depreciable asset can be determined by its market value at a particular time.
False. How is the book value calculated for a depreciable asset?