Income Statement
What is the order of the Income Statement.
1.Revenues
2. Expenses
3. Net Income
What is the basic Accounting Equation?
Assets = Liabilities + Stockholders Equity
What makes a classified balance sheet different from a 'regular' balance sheet?
Current and Non current accounts are separated.
Generating Net Income does what for stockholders?
Increases Stockholders Equity
Negotiations of a deal between 2 companies takes place for a future endeavor. What would the journal entry be?
None
Not until the exchange of goods/services has taken place or obligations were satisfied will this activity be recorded.
The Income Statement contains which type of accounts?
Revenues
Expenses
Which of the following must have at least 2 owners?
1. Corporation ?
2. Sole Proprietorship ?
3. Partnership ?
Partnership
What type of accounts are on a Balance Sheet?
Assets
Liabilities
Stock Holders Equity
What is Common Stock?
Stocks purchased by owners of the company.
In the unadjusted trial balance, debits= ?
Credits!
If Net Income is $765 and Expenses were $2,500.
What were the Expenses equal to?
Revenues = 3265
What is the expense recognition principle?
Expenses are recorded in the same period in which the related revenues are recorded.
Say a company purchases material for a project but can't sell the object till the next quarter. The expense will be recognized when the object is sold.
How can you determine the the normal balance of an account?
It is the side in which the account increases on.
Ex. Cash is debit, debits increase cash
Accounts payable is credit, credits increase payables
Revenue is 4750
Dividends are 200
Expenses are 2000
What is Net Income?
Net Income = 4750 - 2000
2750 = Net Income
What is recorded when a company sells a gift card?
1. Either cash or accounts receivable
2. Deferred Revenue
How is the Header set-up on the financial statements?
1.Company Name
2. Type of Financial Statement
3. Time Period or Point
How many effects does a transaction have on the basic accounting equation? What is the term for the effects?
Every transaction must have at least 2 effects on the accounting equation.
How do you calculate Current Ratio?
Current Assets / Current Liabilities
What is the order of the financial statements?
1. Income Statement
2. Retained Earnings
3. Balance Sheet
4. Statement of Cash Flows
Which of the following are Current Assets?
1. Accounts Receivable
2. Software
3. Prepaid Rent
1. Yes
2. No
3. Yes
How is Net Profit Margin calculated?
Net Income / Revenues = Net Profit Margin
Which type of accounting system/Basis do we use in Financial Accounting and why?
Accrual Basis Accounting because it provides a more accurate description of the company's status.
(cash may be received at a later time then when we recognize the revenue).
Cash payment is collected in May for services provided in March. What type of journal entries will be recorded?
1. Debit to Cash
2. Credit to Accounts Receivable
What is the calculation for your new Retained Earnings?
Previous Retained Earnings
+ Net Income
- Dividends (If Any)
= New Retained Earnings
What does Current Ratio refer to?
The ability of the company do pay its creditor/ its liabilities.