Chapters 1-3

Question 1

the financial statements are

Answer 1

income statement,
statement of retained earnings,
balance sheet,
statement of cash flows

Question 2

accural basis

Answer 2

on accounting method that records revenues when services are products are provided and records expenses when incurred

Question 3

cash basis

Answer 3

acc method that records revenue when cash is received and records expenses when cash is paid

Question 4

adjusting entries

Answer 4

entries made at the end of an accounting period to ensure that the recognition and matching principles are followed

Question 5

revenue recognition principle

Answer 5

companies recognize revenue in accounting period which they’re earned—goods or services have been provided

Question 6

matching principle

Answer 6

recognizes expenses in the same period as the revenues they help to generate

Question 7

to adjust a prepaid asset

Answer 7

debit corresponding expense account and credit prepaid asset (insurance)

Question 8

PPE

Answer 8

property, plant, and equipment: long lived tangible assets such as land, buildings, and equipment used in the operation of business and subject to cost recovery “depreciation”

Question 9

salvage value

Answer 9

estimated value of a fixed asset at the end of its useful life

Question 10

depreciation expense formula:

Answer 10

straigh-line
(cost-salvage value) / useful life = depreciation expense

Question 11

useful life

Answer 11

estimated determinable life of a fixed asset

Question 12

accounting is the

Answer 12

language of business, communicates, identifies, and records organizations business activities

Question 13

a regulator is an example of a ________ user

Answer 13

external

Question 14

accounting equation-

Answer 14

assets = liabilities + equity

Question 15

general ledger contains

Answer 15

all asset, liability, equity accounts and their balances

Question 16

account balance (double-entry accounting)

Answer 16

debit + credit

Question 17

DEALER

Answer 17

dividends
expenses debits increase balances
assets credits decrease balance

liabilities
equity credits increase balance
revenue debits decrease balance

Question 18

net income =

Answer 18

revenue - expenses

Question 19

assets include

Answer 19

cash
supplies
equipment

Question 20

liabilities include

Answer 20

accounts payable
loans payable

Question 21

owners equity includes

Answer 21

costs of goods sold
expenses
revenue

Question 22

GAAP
FASB
SEC

Answer 22

generally accepted accounting principles
financial accounting standards board
securities and exchange commission

Question 23

Financial Statements: Income Sheet

Answer 23

revenues and expenses, net income, net loss

Question 24

Financial Statements: Statement of Retained Earnings

Answer 24

changes in retained earnings

Question 25

Financial Statements: Balance Sheet

Answer 25

assets, liabilities, equity

Question 26

Financial Statements: Statements of Cash Flows

Answer 26

inflows and outflows of cash, operating activity, investing activity, financing activity

Question 27

equity umbrella

Answer 27

equity is made up of contributed capital (common stock) and retained earnings (revenue, dividends, expenses)

Question 28

Contra account and its examples

Answer 28

an asset account that is kept at either a negative or zero balance and is used on a balance sheet to offset the positive balance of a paired asset. a contra account is an account listed within a general ledger with the purpose of capturing the reduced value of a paired or related account when the two are added together. This can be assets, liabilities, equity, and revenue

Question 29

JE: Pays cash for more equipment

Answer 29

dr. Equipment ; cr. Cash

Question 30

JE: Purchases supplies on credit.

Answer 30

dr. Supplies ; cr. Accounts Payable

Question 31

JE: Receives cash from customer for performing services.

Answer 31

dr. Cash ; cr. Revenue

Question 32

JE: Pays cash for rent. Hint: not a prepaid

Answer 32

dr. Rent Expense ; cr. Cash

Question 33

JE: Pays cash to an employee as part of their salary

Answer 33

dr. Salary Expense ; cr. Cash

Question 34

JE: Provides services to a customer who pays on credit.

Answer 34

dr. Accounts Receivable ; cr. Revenue

Question 35

JE: Receives cash from a customer who initially paid on credit.

Answer 35

dr. Cash ; cr. Accounts Receivable

Question 36

JE: Pays cash towards an outstanding liability.

Answer 36

dr. Accounts Payable ; cr. Cash

Question 37

JE: Pays a cash dividend to their shareholders.

Answer 37

dr. Dividends Expense ; cr. Cash

Question 38

JE: Receives cash from a customer in advance for services not yet provided.

Answer 38

dr. Cash ; cr. Unearned Revenue

Question 39

JE: Prepays for a year's worth of insurance coverage in cash.

Answer 39

dr. Prepaid Insurance ; cr. Cash