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Asset, Liability, or Equity?
Income Statement Journal Entries
Definition Questions
Financial Statement Equations
Chapter 1 and 2 Review
100

Accounts Receivable

What is an asset?

100

Paid wages of $1,000 for the current period

Dr. Cash 1,000

Cr. Wages and Supplies Expense 1,000

100

Something that is recorded when the company uses up its resources to generate revenues during the period, regardless of when the company pays for the resource

What is an expense?

100

What is the accounting equation related to the income statement?

Revenues - Expenses = Net Income


100

What side of the t-account do Liabilities increase on?

The right side, the credit side

200

Deferred Revenue

What is a liability?

200

Earned $400 of sales revenue, collected cash

Dr. Cash 400

Cr. Sales Revenue 400

200
Something that indicates the profitability of company operations

What is net income?

200

What is the accounting equation related to the Balance Sheet?

Assets = Liabilities + Stockholders' Equity

200

What side of the t-account do assets increase on?

The left side, the debit side

300
Salaries and Wages Expense

What is an equity?

300

Received $800 of utilities service, on credit

Dr. Accounts Payable 800
Cr. Utilities Expense 800

300
Dividing the company's long life into shorter chunks such as months, quarters, and years

What is the time-period assumption?

300

What is the accounting equation related to the Statement of Cash Flows?

Beginning Balance Cash +/- Cash From Operating Activities +/- Cash from Investing Activities +/- Cash from Financing Activities = Ending Balance Cash

300

What side of the t-account do stockholders' equity increase on?

The right side, the credit side

400

Prepaid Rent

What is an asset?

400
Earned $400 of service revenue, collected half in cash, with balance on credit
Dr. Cash 200

Dr. Accounts Receivable 200
Cr. Service Revenue 400

400

Method of accounting that records revenues when cash is received and expenses when cash is paid

What is cash-basis accounting?

400

What is the accounting equation related to the Statement of Retained Earnings?

BBRE + NI - Div = EBRE

400

What is the current ratio?

Current Assets / Current Liabilities

500
Sales Revenue

What is an equity?

500

Incurred $300 of advertising costs; paid half in cash, with balance on credit

Dr. Advertising Expense 300
Cr. Cash 150
Cr. Accounts Payable 150

500

Method of accounting that records revenues when earned and expenses when incurred, regardless of the timing of cash receipts or payments

What is accrual-basis accounting?

500

How do you calculate equity? (Hint: What are the two sources of stockholder's equity)

Paid-in Capital (Common Stock) + Earned Capital (Retained Earnings)
500
You borrowed $100,000 cash from a local bank, payable in two years. What accounts are affected by this transaction?
Notes Payable, Cash