Chapter 1
What type of activity is paying for advertising?
Operating
In accounting, the word debit translates to
left side
Which type of accounting records revenues at the time cash is received and expense at the time cash is paid
Cash-Basis Accounting
What is the journal entry if a company issues $10,000 worth of common stock in exchange for cash?
Debit Cash $10,000 / Credit Common Stock $10,000
In order, what are the financial statements?
Income Statement, Statement of Stockholder's Equity, Balance Sheet, Statement of Cash Flows
In which type of business do owners have limited liability?
Corporation
A list of all company names used to record transactions of a company is called?
Chart of accounts
What is the principle that says a company must record revenues in the period the good or service is provided
Revenue Recognition Principle
What is the journal entry if a company receives $8,000 in advance for a service to be preformed at a later date?
Debit Cash $8,000 / Credit $8,000
What is the name of the organization primarily responsible for establishing financial accounting and reporting standards in the United States?
FASB
The process of transferring the debit and credit information in the general ledger
Posting
When you do physically provide the service for deferred revenue, what account will be credited?
Service Revenue
ADJUSTING** What is the adjusting entry if a company had $12,000 worth of supplies in the beginning of the period, and at the end of the period supplies left on hand is worth $3,000?
Debit Supplies Expense $9,000 / Credit Supplies $9,000
Which accounts are found in the income statement or statement of stockholder's equity, but not the balance sheet
Revenues, Expenses, Dividends
What are the two fundamental characteristics of accounting?
Relevance and Faithful Representation
When a company sells land, it is classified as which type of activity?
Investing
Which accounts are closed?
Temporary Accounts - Revenue, Expense and Dividends
ADJUSTING** On December 1st, a company pays for insurance covering a one-year period worth $1,200. At the end of the month, what adjusting entry will the company make?
Debit Insurance Expense $100 / Credit Insurance Expense $100
Which of the following would cause an increase in total assets: 1.Paying working
2. Purchasing office supplies with cash
3. Issue common stock for cash
4. Collect an accounts receivable
3. Issue common stock for cash
Which of the four underlying assumptions relates to the idea that a business entity will operate indefinitely unless stated otherwise.
Going Concern
What lists all accounts and their balances at a particular date, show that total debits equal total credits
Trial Balance
What effect will paying dividends have on the balance sheet?
Initial transaction: Debit Dividends / Credit Cash
Decrease assets / Decrease Retained Earnings
CLOSING** At the end of the year, total rent expenses were $3,000. What is the closing entry to close out the rent expense account for the year.
Debit Retained Earnings $3000 /
Credit Rent Expense $3000
How do you find ending retained earnings for a company?
beginning retained earnings, plus net income, minus dividends = ending retained earnings