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Terminology
Accounting Equation
Debits/Credits
Adjustments
Revenues/Receivables
100

What is the difference between A/P and A/R?

A/P = An obligation to pay another business.

A/R = An Obligation for a customer/business to pay you.

100

What is the Accounting Equation?

Assets = Liabilities + Equity

100

ABC Company buys $5,000 of office supplies on account.

  • Debit: Office Supplies $5,000 (increase in asset)
  • Credit: Accounts Payable $5,000 (increase in liability)
100

ABC Corp. received $6,000 in cash from a customer on December 1, 2024, for services to be provided over the next 3 months. What is the adjusting journal entry needed on December 31, 2024?

  • Debit: Unearned Revenue $2,000 (decrease in liability)
  • Credit: Service Revenue $2,000 (increase in revenue)
100

What are the 5 steps for Revenue Recognition?

1. Identify the Contract

2. Identify the performance obligation

3. Determine the transaction price

4. Allocate the transaction price to the performance obligation in the transaction

5. Recognize revenue when the performance obligation is satisfied 

200

What is the definition of an expense?

The Cost incurred by a business to create revenue or stay in business. 

200

If total liabilities increased by $30,000 and stockholders' equity decreased by $10,000 during a period, then total assets must change by what amount during that same period?

$20,000 increase

200

LMN Company pays $1,200 for rent for the current month.


  • Debit: Rent Expense $1,200 (increase in expense, which decreases equity)
  • Credit: Cash $1,200 (decrease in asset)
200

XYZ Inc. paid $24,000 for a one-year insurance policy on January 1, 2024. What is the adjusting journal entry on December 31, 2024, to account for 12 months of insurance expense?

  • Debit: Insurance Expense $24,000 (increase in expense)
  • Credit: Prepaid Insurance $24,000 (decrease in asset)
200

How do you calculate Net Revenue?

Revenue - returns - discounts = Net Revenue

300

What is a Trial Balance?

A report listing the balances of all ledgers to ensure that debits equal credits.

300

ABC Corp. had a total equity increase of $50,000 during the year. The company issued $30,000 in common stock and paid $10,000 in dividends. What was ABC Corp.'s net income for the year?

$30,000

300

DEF Ltd. purchases inventory worth $15,000, paying $5,000 in cash and the rest on credit.

  • Debit: Inventory $15,000 (increase in asset)
  • Credit: Cash $5,000 (decrease in asset)
  • Credit: Accounts Payable $10,000 (increase in liability)
300

LMN Corporation has a long-term note payable of $100,000, which carries an annual interest rate of 5%. Interest is paid annually. What is the adjusting journal entry on December 31, 2024, for interest expense if the note was issued on January 1, 2024?

  • Debit: Interest Expense $5,000 (increase in expense)
  • Credit: Interest Payable $5,000 (increase in liability)


300

A customer pays for $13,500 for inventory with a 3/5, n/30 discount. What is the price paid by the customer when $ is received?

$13095

400

What is the Difference between Accrual Accounting and Cash Basis Accounting?

Accrual accounting records revenues and expenses when they occur, regardless of cash flow, while cash basis accounting records revenues and expenses only when cash is received or paid.

400

During the year, total liabilities increased by $50,000, stockholders' equity increased by $20,000, and the company issued $10,000 in new stock. What was the change in total assets during the year?

$70,000 increase

400

XYZ Ltd. issues bonds worth $100,000 at a 6% annual interest rate. The bonds mature in 5 years. The company receives cash from the bond issuance.

  • Debit: Cash $100,000 (increase in asset)
  • Credit: Bonds Payable $100,000 (increase in liability)


400

GHI Inc. issued bonds on January 1, 2024, with a face value of $50,000, paying 6% annual interest. The interest is due annually on December 31. What is the adjusting journal entry for July 31st, 2024, for the interest expense?

  • Debit: Interest Expense $1,750 (increase in expense)
  • Credit: Interest Payable $1,750 (increase in liability)
400

ABC Company has an accounts receivable balance of $300,000 at the end of the year. After reviewing the accounts, the company determines that it needs to write off a $5,000 balance from a customer who is unable to pay.

What is the journal entry to write off the uncollectible account?

  • Debit: Allowance for Doubtful Accounts $5,000 (decrease in contra-asset)
  • Credit: Accounts Receivable $5,000 (decrease in asset)


500

What is a Contra Asset?

A contra asset is an account that is used to reduce the value of a related asset on the balance sheet. It has a normal credit balance, which is the opposite of the normal debit balance of an asset account.

500

A company writes off bad debts of $1,000. How does this affect the accounting equation?

  • It doesn't
  • A/R decreases
  • Allowance for Doubtful Accounts Increases
500

XYZ Corp. begins the year with $25,000 worth of inventory. During the year, the company purchases additional inventory worth $60,000 on credit. At the end of the year, the company conducts a physical inventory count and finds that the ending inventory is $30,000.

The company sells inventory for $90,000, and the cost of goods sold (COGS) is calculated based on the inventory information.

What are the journal entries for this series of transactions?

1. Record the purchase of inventory:

When inventory is purchased on credit:

  • Debit: Inventory $60,000 (increase in asset)
  • Credit: Accounts Payable $60,000 (increase in liability)

When the inventory is sold for $90,000:

  • Debit: Accounts Receivable (or Cash) $90,000 (increase in asset)
  • Credit: Sales Revenue $90,000 (increase in equity, as revenue increases)

The COGS of $55,000 needs to be recognized to account for the cost of inventory sold:

  • Debit: Cost of Goods Sold (COGS) $55,000 (increase in expense, which decreases equity)
  • Credit: Inventory $55,000 (decrease in asset)


500

The equipment has a cost of $50,000, with a 5-year useful life and no residual value.

Record Initial Purchase and depreciation for 6 months.


Debit: Equipment $50,000  

Credit: Cash (or Accounts Payable) $50,000


Debit: Depreciation Expense $5,000  

Credit: Accumulated Depreciation $5,000

500

he ending balances of Accounts Receivable (A/R) and Allowance for Doubtful Accounts (AFDA), before any adjustment for bad debts, are as follows:

  • Accounts Receivable (A/R) = $900,000
  • Allowance for Doubtful Accounts (AFDA) = $10,000 (credit balance)

You estimate that 5% of the A/R balance is uncollectible.

What is the adjusting journal entry for bad debts?

Debit Bad Debt Expenses for $35,000 and credit Allowance for Doubtful Accounts for $35,000.