Accounting Cycle
What number step is retrieving information from source documents?
What is step 1
What a business owes
What are liabilities
Pays $500 for inventory
Dr. Inventory Cr. Cash both for $500
Inventory
What is an asset
T/F should debits and credits equal
True
Where are transactions recorded?
What is a journal
Assets=Liabilities+Equity
What is the accounting equation
Receives $2,000 Cash previously on account
Dr. Cash Cr. Accounts Receivable both $2,000
Retained Earnings
What is equity
Its purpose is to provide useful information to external users
What is financial accounting
What is posted from journal?
What is the general ledger
Principle where a company's ongoing financial activities can be divided into artificial time periods
What is the periodicity assumption
Provided services for $1,000 on account
Dr. Accounts Receivable Cr. Service Revenue both $1,000
Prepaid Insurance
What is an asset
Revenues-expenses
What is net income
What do we create after making adjusted trial balance?
What are financial statements
Costs used to generate revenue
What are expenses
Accrued Salaries of $10,000
Dr. Salaries Expenses Cr. Salaries Payable both for $10,000
Cost of Goods Sold
What is an expense
What statement finds ending retained earnings for the period?
What is statement of shareholders' equity (statement of retained earnings)
Final product of accounting cycle
What is the post-closing trial balance
Principle where revenues should be recorded when earned not when cash is received
What is the revenue recognition principle
Sells $100 gift card for cash
Dr. Cash Cr. Deferred Revenue bothfor $100
Deferred Revenue (Unearned Revenue)
What is a liability
Beginning Retained Earnings+Net income-Ending Retained Earnings
What are Dividends (Distributions to owners)