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Principles of Accounting > AC Financial Statements > Flashcards

AC Financial Statements Flashcards

1
Q

Fill in the blank

The balances of the accounts reported on the ___ are carried forward from period to period.

Closing Entries

Completing the Accounting Cycle

A

balance sheet

Closing Entries

Completing the Accounting Cycle

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2
Q

Fill in the blank

The balances of the accounts reported on the balance sheet are carried forward from ___.

Closing Entries

Completing the Accounting Cycle

A

period to period

Closing Entries

Completing the Accounting Cycle

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3
Q

Fill in the blank

Because the accounts reported on the balance sheet are carried forward from period to period, they are called ___ or ___.

Closing Entries

Completing the Accounting Cycle

A

permanent accounts [or] real accounts

Closing Entries

Completing the Accounting Cycle

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4
Q

enumerate

balance sheet permanent accounts

Closing Entries

Completing the Accounting Cycle

A
  • Cash
  • Accounts Receivable
  • Equipment
  • Accumulated Depreciation
  • Accounts Payable
  • Owner’s Capital
  • any account whose balance doesn’t reset to zero at the end of the period

Closing Entries

Completing the Accounting Cycle

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5
Q

Complete the sentence

The accounting process begins with (1) […] and
ends with (2) […]

Closing Entries

A

(1) analyzing and journalizing transactions
(2) post-closing trial balance

Closing Entries

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6
Q

Concept

Transactions are analyzed and recorded in the journal

Financial Accounting 16e

A

Accounting Cycle - Step 1

Financial Accounting 16e

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7
Q

Concept

Transactions are posted to the ledger.

Financial Accounting 16e

A

Accounting Cycle - Step 2

Financial Accounting 16e

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8
Q

Concept

An unadjusted trial balance is prepared

Financial Accounting 16e

A

Accounting Cycle - Step 3

Financial Accounting 16e

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9
Q

Concept

Adjustment data are assembled and analyzed

Financial Accounting 16e

A

Accounting Cycle - Step 4

Financial Accounting 16e

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10
Q

Concept

An optional end-of-period spreadsheet is prepared

Financial Accounting 16e

A

Accounting Cycle - Step 5

Financial Accounting 16e

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11
Q

Concept

Adjusting entries are journalized and posted to the ledger

Financial Accounting 16e

A

Accounting Cycle - Step 6

Financial Accounting 16e

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12
Q

Concept

An adjusted trial balance is prepared

Financial Accounting 16e

A

Accounting Cycle - Step 7

Financial Accounting 16e

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13
Q

Concept

Financial statements are prepared

Financial Accounting 16e

A

Accounting Cycle - Step 8

Financial Accounting 16e

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14
Q

Concept

Closing entries are journalized and posted to the ledge

Financial Accounting 16e

A

Accounting Cycle - Step 9

Financial Accounting 16e

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15
Q

Concept

A post-closing trial balance is prepared

Financial Accounting 16e

A

Accounting Cycle - Step 10

Financial Accounting 16e

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16
Q

identify which steps are missing from the accounting cycle

a. Transactions are analyzed and recorded in the journal.
b. Transactions are posted to the ledger.
c. Adjustment data are assembled and analyzed.
d. An optional end-of-period spreadsheet is prepared.
e. Adjusting entries are journalized and posted to the ledger.
f. Financial statements are prepared.
g. Closing entries are journalized and posted to the ledger.
h. A post-closing trial balance is prepared.

Accounting Cycle

A

(1) the preparation of an unadjusted trial balance after step (e)
(2) The unadjusted trial abalance should be prepared after step (b)

Accounting Cycle

17
Q

Enumerate steps

The first step in the accounting cycle is to analyze and record transactions using …

Accounting Cycle

A
  1. Carefully read the description of the transaction to determine nature: asset, liability, owner’s equity, revenue, expense, or drawing
  2. Determine increases or decreases in the affected accounts involving the transaction
  3. Determine whether each increase or decrease is a debit or credit
  4. Record the transaction using a journal entry

Accounting Cycle

18
Q

Enumerate steps

Step 2. Posting transactions to the ledger using…

Accounting Cycle

A
  1. The date is entered in the Date column for the account
  2. The amount is entered in the Debit or Credit column
  3. The jounral page number is entered in the Posting Reference column
  4. The account number is entered

Accounting Cycle

19
Q

Enumerate steps

Step 3. Preparing an unadjusted trial balance

Accounting Cycle

A
  1. A check for the equality of debits and credits is made.
  2. If the two totals of a trial balance are not equal, an error has occured.
  3. The error is then discovered and corrected.

Accounting Cycle

20
Q

Enumerate steps

Step 4. Assembling and analyzing adjustment data

Accounting Cycle

A
  1. The accounts must be updated.
  2. The four types of accounts that normally require updating: prepaid expenses, unearned revenue, accrued revenue, and accrued expenses.

Accounting Cycle

21
Q

Enumerate steps

Step 5. Preparing an optional end-of-period spreadsheet

Accounting Cycle

A
  1. An end-of-period spreadsheet is useful in showing the flow of accounting information from the unadjusted.
  2. it is also useful in analyzing the impact of proposed adjustments on financial statements.

Accounting Cycle

22
Q

Enumerate steps

Step 5. Preparing an optional end-of-period spreadsheet

Accounting Cycle

A
  1. An end-of-period spreadsheet is useful in showing the flow of accounting information from the unadjusted.
  2. it is also useful in analyzing the impact of proposed adjustments on financial statements.

Accounting Cycle

23
Q

Enumerate steps

Step 6. Journalizing and posting adjusting entries

Accounting Cycle

A
  1. Each adjusting entry affects at least one income statement account and one balance sheet account.
  2. Explanations for each adjustment including any computations are normally included with each adjusting entry

Accounting Cycle

24
Q

Enumerate steps

Step 7. Preparing an adjusting trial balance

Accounting Cycle

A
  1. The adjusted trial balance is the last step before preparing the financial statements.
  2. The adjusted trial balance must balance

Accounting Cycle

25
Q

Enumerate steps

Step 8. Preparing the financial statements

Accounting Cycle

A
  1. The income statement is prepared
  2. The statement of owner’s equity is prepared
  3. The balance sheet is prepared last
  4. The net income or net loss from income statement is reported on the statement of owner’s equity along with any additional investments and withdrawals by the owner.
  5. The ending owner’s capital is reported on the balance sheet
  6. This value is added with total liabilities to equal total assets

Accounting Cycle

26
Q

Enumerate steps

Step 9. Journalizing and posting closing entries

Accounting Cycle

A

Two closing entries are required at the end of the accounting period.
1. First Closing Entry:
Debit each revenue account for its balance,
Credit each expense account for its balance
Credit (net income) or
Debit (net loss) the owner’s capital account
2. Second Closing Entry:
Debit the owner’s capital account for the balance of the drawing account
Credit the drawing account

Accounting Cycle

27
Q

Enumerate steps

Step 10. Preparing a post-closing trial balance

Accounting Cycle

A
  1. A post-closing trial balance is prepared after the closing entries have been posted.
  2. The accounts and amounts in the post-closing trial balance shold agree exactly with the accounts and amounts listed on the balance sheet at the end of the period.

Accounting Cycle

28
Q

Fill in the blank

The ability to convert assets into cash is called ___.

Accounting Cycle

A

liquidity

Accounting Cycle

29
Q

Fill in the blank

The ability of a business to pay its debts is called ____.

Accounting Cycle

A

solvency

Accounting Cycle

30
Q

Fill in the blank

Two financial measures for evaluating a business’s liquidity and solvency are working ___ and _____.

Accounting Cycle

A

working capital [and] current ratio

Accounting Cycle

31
Q

Concept

Is the excess of the current assets of a business over its current liabilities.

Accounting Cycle

A

working capital

Accounting Cycle

32
Q

Concept

Is another means of expressing the relationship between current assets and current liabilities.

Accounting Cycle

A

working capital

Accounting Cycle

33
Q

Fill in the blank

__(1)___ assets are more liquid than __(2)___ assets.

Accounting Cycle

A
  1. current
  2. long-term

Accounting Cycle

34
Q

Determine the working capital and current ratio for 20Y6 and 20Y6

A
35
Q

Is the change in the current ratio from 20Y6 to 20Y7 favorable?

A

($310,500 / $172,500) = 1.80 20Y7
($262,500 / $150,000) = 1.75 20Y6

The change from 1.75 to 1.80 is favorable.

Principles of Accounting (15 decks)

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