Financial Statements
This is the financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
Balance Sheet
This type of adjusting entry is made when cash is received before revenue is earned (what is the debit and credit accounts?)
Debit Cash, Credit Deferred Revenue
When a company pays rent in advance, this account is debited.
Prepaid rent
A company collects $10,000 from customers for services performed last month. How is this classified on the cash flow statement?
Operating activity
This principle ensures that financial statements are prepared using consistent methods across periods.
Consistency principle
In which statement is deferred revenue recorded?
Balance sheet
Closing entries are used to transfer balances from temporary accounts to this permanent account
Retained earnings
What is credited when borrowing money from the bank?
Notes payable
A company issues $100,000 in common stock to raise capital. How is this cash inflow classified?
Financing activity
This principle requires that financial statements reflect only transactions that can be measured reliably in monetary terms.
Monetary unit assumption
This non-operating item is subtracted after operating income and before net income.
Interest expense
This temporary account is closed by debiting it and crediting Income Summary
Revenue
What is credited when common stock is issued for cash?
Common stock
A company makes a $100,000 payment on a lease liability under a lease.
Financing activity
This principle requires that revenue be recognized when earned, not when cash is received.
Revenue Recognition Principle
This is the last line of the income statement.
Net income
This account is never affected by adjusting entries
Cash
When a company receives cash for services not yet performed, this account is credited.
Unearned/deferred revenue
A company reclassifies a long-term note receivable to short-term due to upcoming maturity. How does this affect the cash flow statement?
Non-cash activity
This principle requires that financial statements be based on objective, verifiable evidence.
Historical cost principle
This account reduces the value of an asset.
Accumulated depreciation
If a company forgets to record an adjusting entry for accrued wages, this financial statement will ______ net income.
inflate, overstate
What is debited when depreciating equipment?
Depreciation expense
A company exchanges land for common stock.
Non-cash
This principle requires that significant financial information be disclosed, even if not directly reported in the financial statements.
Full Disclosure principle