Basic Concepts
Which financial statement shows a point in time?
Balance Sheet
What is the basic accounting equation?
Assets = Liabilities + SHE
What are the 4 financial statements?
- Balance sheet
- Income Statement
- Statement of Retained Earnings
- Statement of Cash Flows
Walmart buys supplies for $1000 with cash.
What is the journey entry?
Inventory 1000
Cash 1000
Which of these is NOT recorded as an accounting transaction?
a. Buying inventory and paying with cash
b. Paying wages to employees
c. Ordering office supplies to be delivered and payed for next month
c. Ordering office supplies to be delivered and payed for next month
Which organizational form is owned by 1 person?
Partnership
Which type of account is Deffered Revenue?
Liability
What is included in the header of every financial statement?
- Name of the business
- Name of the financial statement
- Time period/point
Paid $16,000 in wages to employees on September 30th for work done during the month.
What is the journal entry?
Salaries and Wages Expense 16000
Cash 16000
A company has current assets of $600 and noncurrent assets of $250. Current liabilities are $200 and total stockholders equity is $300. What is the current ratio?
3
What are the 4 enhancing qualities of useful information?
- Timely
- Verifiable
- Comparable
- Understandable
Which accounts are considered current assets?
- Cash
- Accounts Receivable
- Prepaid Rent
- Supplies
- Inventory
Which is not an offical financial statement?
a. Statement of Cash Flows
b. Trial balance
c. Income Statement
d. Statement of Retained Earnings
Trial Balance
On October 1st, a customer bought a Netflix subcription for $20.
What journal entry does Netflix record?
Cash 20
Deferred Revenue 20
Walmart had revenues of 185,000 and expenses of 80,000.
What is the Net Profit Margin?
Net Profit Margin = Net Income/Revenues
= 0.568 or 56.8%
Who are the targets for financial accounting information?
External Users
What does Stockholders' Equity represent?
Owners' claims to the business resources
How do you create an income statement?
List revenues --> Add them up
List expenses --> Add them up
Calculate total net income by subtracting total expenses from total revenues
A lawn mowing company provides services to a customer for $600. The customer pays $250 in cash and agrees to pay the remaining amount in the next 30 days.
What is the journal entry?
Cash 250
Accounts Receivable 350
Service Revenue 600
Who are the external users of accounting information?
Investors
Creditors
Government
Directors
What is the main goal of the accounting system?
To capture useful information about a business to report it to decision makers
An expense is "expensed" when it is ___?
Used
What is the name of the accounting principles that managers of companies in the U.S. have to follow when preparing financial accounting information?
GAAP
Signed a note to borrow $1500 in cash on July 30 from Bank of America. The note will be paid back in 3 months.
What is the journal entry?
Cash 1500
Notes Payable - Short Term 1500
Under accrual basis accounting, when are revenues recognized?
Revenues are recognized when they are EARNED