Financial Statements
This statement measures a companies financial performance over a period
What is never affected by adjusting journal entries?
What is cash?
Purchase inventory on account for $2,000.
Debit inventory $2,000; credit A/P $2,000
Inventory system where cost of goods sold is updated continuously
What is the perpetual system?
The set of rules companies follow when preparing financial statements in the U.S.
What is GAAP (generally accepted accounting principles)?
Which statements would reflect the purchase of equipment with cash?
What is the Balance Sheet and Statement of Cash Flows (investing)?
Expenses incurred but not yet paid require this type of adjustment.
What are Accrued Expenses?
Pay $1,200 cash for rent for the current month.
Debit rent expense $1,200; credit cash $1,200
Under FIFO in rising prices, cost of goods sold compared to LIFO will be...
What is lower?
A company reports net income of $120,000 and average outstanding shares of 60,000. What is EPS?
If a company overstates revenue, this element of the balance sheet is also overstated.
What is Retained Earnings?
Cash received before revenue is earned is initially recorded as this.
What are Unearned Revenues?
A company repurchases 1,000 shares of its own stock for $10 per share. Record the journal entry.
Debit Treasury Stock $10,000; credit cash $10,000
Ending inventory is understated. This causes net income to be…
What is understated?
Recognizing revenue before it is earned violates this principle.
What is the Revenue Recognition Principle?
If a company delays recording expenses until the next period, which financial statements are affected?
What is the Income Statement and Balance Sheet?
A company declares Customer A's account unpayable and records a write-off; what is the effect on the accounting equation?
No effect.
Sell inventory for $4,000 cash; the inventory cost was $2,500.
Debit cash $4,000; credit revenue $4,000
Debit COGS $2,500; credit inventory $2,500
A company buys equipment for $10,000 with a 5-year life and no residual value. Annual depreciation using straight-line is…
What is $2,000 per year?
A company delays recording expenses to boost earnings this period. This violates which principle?
What is matching principle?
Which statement is least affected by accrual accounting adjustments?
What is the statement of cash flows?
A company fails to record depreciation. Identify the effects.
What is Net income overstated and assets overstated?
Sell equipment for cash $12000. Original cost was $20000 and A/D is $9000.
Beginning inventory is understated by $4,000 in Year 1. Assume no other errors. What is the effect on Year 1 Net Income and Year 2 Net Income?
Year 1 net income overstated
Year 2 net income understated