College Accounting Flashcards
(226 cards)
1
Q
What are some certifications in accounting?
A
- Certified bookkeeper (CB)
- Certified payroll professional (CPP)
- Personal financial specialist (PFS)
- Certified fraud examiner (CFE)
- Certified public accountant (CPA)
- Certified forensic accountant (CrFA)
- Cerfiticate in management accounting (CMA)
1
Q
What are the aims of GAAP?
A
Relevant information affects the decisions of its users
Reliable information is trusted by users
Comparable information is helpful in contrasting organizations
1
Q
What is AWE and its normal balance?
A
Assets, Withdrawals, and Expenses. Normal balance: Debit (Dr)
2
Q
What does the Income Statement calculate and how is it formated?
A
Calculate: Net income or loss = Revenue - Expenses
Format: Name of company, Title of document, Date (i.e: For the month ended ____)
3
Q
What is Managerial Accounting?
A
Area of accounting that serves the decision-making needs of internal users
4
Q
Calculate the equity of a company when given the assets, investments, net income, and owner’s withdrawals.
A
Equity = Owner investments + Net income - Owner’s withdrawals
5
Q
What is the accounting equation?
A
Assets = Liabilities + Owners Equity
Owner Equity = Owner Capital - Owner Withdrawal + Revenue - Expenses
5
Q
What is the purpose of the Balance Sheet and how is it formated?
A
Verifies that accounting equation is balanced.
Calculate: Assets = Liabilities + Ending Capital
Format: Name of company, Title of document, Date
6
Q
What is business entity assumption?
A
Concept that assumes a business will be accounted for separately from its owner(s) and any other entity
7
Q
What are the different characteristics between proprietorship, partnership, and corporation?
A
- Proprietorship
- 1 owner
- Company is not a separate legal entity
- Limited liability if set up as LLC
- Company’s income reported on owner’s tax return
- Business dies with owner
- Partnership
- 2 or more owners
- Company is not a separate legal entity
- Limited liability if set up as LLC
- Company’s income reported on partners’ tax return
- Corporation
- Separate legal entity from owners so responsible for its own acts and debts
- Acts through its managers, who are its legal agents
- Owners, or shareholders/stockholders, are not personally liable for corporate acts and debts
- Double taxation: corporation’s income is taxed and distribution of income to corporation’s owners through dividends is taxed as part of owners’ personal income
8
Q
What accounts are under assets?
A
- Cash
- Supplies
- Equipment
- Land
- Accounts receivable
- Notes receivable
- Vehicles
9
Q
What are ethics and why are they important in accounting?
A
Beliefs that distinguish right from wrong. It influences the choices that accountants make which can affect the business both internally and externally.
9
Q
What are the financial statements and which order should they be completed in?
A
- Income statement
- Statement of Owner’s Equity
- Balance Sheet
10
Q
What is a trial balance?
A
List of accounts, usually in the order of the accounting equation, and their balances at a point in time. Used to verify that debits equal credits
11
Q
What are Internal Controls? Examples
A
Procedures designed to:
- Protect company property
- Ensure reliable reports
- Promote efficiency
- Ensure employees follow company policies
Ex:
- Good records
- Physical controls (locks, passwords, guards, etc)
- Independent reviews
11
Q
What is LRC and its normal balance?
A
Liabilities, Revenue, and Capital. Normal balance: Credit (Cr)
12
Q
What main groups establish GAAP in the U.S?
A
Financial Accounting Standards Board (FASB) - Private group that sets both broad and specific principles for private organizations
Securities and Exchange Commission (SEC) - government group that establishes reporting requirements for companies that issue stock to the public
12
Q
What are creditors?
A
Individuals and organizations that are entitled to receive payment from a company
13
Q
What is footings?
A
Totals of debits and credits
14
Q
Which aspect of the accounting equation changes with the following:
- Investing cash and equipment to start a company
- Purchasing supplies with cash
- Purchasing equipment on account
- Receiving cash payment for performing service
- Receiving utility bill
- Paying utility bill
- Paying workers
A
- Increase in cash and equipment (A); Increase in Owner capital (OE)
- Decrease in cash (A); Increase in supplies (A) = No change in A
- Increase in equipment (A); Increase in Accounts payable (L)
- Increase in cash (A); Increase in revenue (OE)
- Increase in Accounts payable (L); Increase in Expense (Decrease OE)
- Decrease in cash (A); Decrease Accounts payable (L)
- Decrease in cash (A); Increase in Expense (Decrease OE)
15
Q
What is the Sarbanes-Oxley Act?
A
Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws
16
Q
What are the accounting information uses?
A
- Indentifying business activities and transactions relevant to an organization
- Recording business activities in a chronological log
- Communicating business activities by preparing accounting reports such as financial statements
17
Q
What is Financial Accounting?
A
Area of accounting aimed at serving external users by providing them with financial statements
19
Q
What are Internal Users? Examples.
A
Users directly involved in managing and operating an organization
Ex:
- Owners
- Managers
- Sales staff
- Internal auditors
- Budget officers
- Controllers
20
What is double-entry accounting?
Method in which each transaction be recorded in at least two accounts thus total amount of debited must equal total amount credited for each transaction
21
What is an account?
Record within an accounting system in which increases and decreases are entered and stored in a specific asset, liability, equity, revenue, or expense
22
What is the difference between rules-based and principles-based?
Rules-based: companies apply technical, specific, and detailed rules in preparing financial statements
Principles-based: companies develop and apply broad, fundamental concepts for reporting; more preferred as they allow for more flexibility
23
What are External Users? Examples
Users not directly involved in running the organization
Ex:
* Capital providers
* External auditors
* Labor unions
* Regulators
* Business associates
* Lenders
* Shareholders
23
How is the Balance Sheet different from the Income Statement and Statement of Owner's Equity?
Balance sheet reports the amount of assets, liabilities, and owner's equity at a specific point in time
Income statement and Statement of OE reports profitability and change in equity over time respectively
24
Calculate the Owner Investments when given Assets and liabilities of the previous and current year, net income, and owner's withdrawals.
Previous year's (PY) ending capital = Current year's (CY) beginning capital
PY Ending capital = PY Assets - PY Liabilities
CY Ending capital = CY Assets - CY Liabilities
Owner investment = (CY Ending capital - PY Ending capital) + Net income - Owner's withdrawals
25
What is unearned revenue and what account does it fall under?
The receiving of payment prior to performing of service thus falls under liability
26
What is equity?
Owner's claim on assets.
Equity = Assets - Liabilities
27
What is debit?
Left side of the T-account
28
What is credit?
Right side of the T-account
29
What is a contra account?
An account linked with another account in which its normal balance is opposite that of the other account's balance
30
What is IFRS?
International Financial Reporting Standards
32
What Internal Auditors do?
Design and test employer's internal controls
33
What is the account balance?
Total of debit - credit
35
What is GAAP?
Generally Accepted Accounting Priciples
36
What is a T-account?
A tool used to understand the effects of transactions on different accounts
38
What accounts are under owner's equity?
* Owner capital
* Owner withdrawal
* Revenue
* Expenses
40
What are the different areas of accounting?
1. Private accounting
2. Public accounting
3. Government, not-for-profit, and education
41
What is prepaid and what account does it fall under?
Amount a business has paid in advance for future goods or services (i.e insurance, rent, etc). Assets
43
What are assets?
Resources owned or controlled by the company that are expected to yield future benefits
44
What are the steps for searching and correcting errors on the trial balance sheet?
1. Verify that the trial balance columns are correctly added
2. Verify that account balances are accurately entered from the T-account to the trial balance
3. Check to see whether a Dr (or Cr) balance is mistakenly listed in the trial balance as Cr (or Dr)
4. Recompute each account balance in the T-accounts
5. Verify that the debits equal the credits for each transaction
45
What are external transactions?
Exchanges of value between one entity and another entity
46
What is an account's normal balance?
The side of the T-account on which increases are recorded
47
What are liabilities?
Payments the company owes. Creditors' claims on assets.
49
What is the saying regarding ethics of accounting?
"Good ethics are good business"
50
What are the different ownership structures?
1. Sole proprietorship
2. Partnership
3. Corporation
51
What is IASB?
International Accounting Standards Board creates standards that identify preferred accounting practices between companies in different countries
52
What accounts are under liabilities?
* Accounts payable
* Notes payable
* Taxes payable
* Wages payable
53
What are the four career paths of accounting?
1. Financial
2. Managerial
3. Taxation
4. Accounting-related
54
What are the different types of businesses?
1. Service: provides services to customers
2. Merchandising: buys products from other companies and resells them to consumers
3. Manufacturing: makes products to sell to either merchandisers and/or consumers
55
What are internal transactions?
Activities within an organization that can affect the accounting equation
56
What does the Statement of Owner's Equity calculate and how is it formatted?
Calculate: Ending Capital = Beginning capital + Investments by owner (+ Net income or - Net Loss) - Withdrawals by owner
Format: Name of company, Title of document, Date (i.e: For the month ended \_\_\_\_)
57
Which accounting principle is practiced in the US?
GAAP
58
What is the balance column account?
Account with debit and credit columns for recording entries and another column for showing the running balance of the account after each entry
59
What is the chart of accounts?
List of accounts used by a company; includes identification number for each account
60
What is a compound journal entry?
Entry that affects three or more accounts
61
What is a general journal?
All-purpose journal for recording the debits and credits of all transactions and events in chronological order before they are posted to ledger accounts
62
What is journalizing?
Process of recording transactions in a journal
63
What is a ledger?
Permanent record containing all accounts (with amounts) for a business
64
What is posting?
Process of transferring journal entry information to a ledger; computerized systems automate this process
65
What is the posting reference (PR) column?
Column in journals and ledgers in which individual ledger account numbers are entered when entries are posted to those ledger accounts
66
What are source documents and some examples?
Source of information for accounting entries that can be in either paper or electronic form; also called business papers
Ex:
* Sales invoices
* Checks
* Purchase orders
* Bills from suppliers
* Employee earnings records
* Bank statements
67
What do you do if there is an entry error:
* Before the entry has been posted
* After the entry has been posted
* Before posting: Go back to orignal entry and make necessary changes
* After posting: create a new entry that corrects the error
68
How do you calculate the balance after the first entry of the month?
Add debit or credit with end balance from previous month
69
What is a work sheet?
Helps accountants prepare financial statements and aids in the closing process
70
What are working papers?
Internal documents used by accountants to prepare formal reports and financial statements
71
What are the benefits of a work sheet?
* Aids preparation of financial statements
* Reduces the possibility of errors when working with many accounts and adjustments
* Links accounts and adjustments to their impacts in financial statements
* Assists in planning and organizing an audit of financial statements
* Helps in preparing interin (monthly and quarterly) financial statements when journalizing and posting of adjusting entries postponed until year-end
* Shows effects of proposed or "what-if" transactions
* Aids in closing temporary accounts
72
Is a work sheet a required report or accounting record?
No
73
When is a work sheet constructed?
At the end of a period before the adjusting process
74
How do you prepare a work sheet?
1. Enter unadjusted trial balance
2. Enter adjustments
3. Prepare adjusted trial balance
4. Sort adjusted trial balance amounts to financial statements
5. Total statement columns, compute income or loss, and balance columns
75
How is net income entered into the work sheet?
Debit in the Income statement column
Credit in Balance Sheet and SoOE column
76
How is net loss entered into the work sheet?
Credit in Income Statement column
Debit in Balance Sheet and SoOE column
77
Is Owner's Equity updated in the work sheet?
No, only owner's capital is calculated in work sheet
78
What is accrural basis accounting?
Adjusting process used to recognize revenues when earned and expenses when incurred
79
What is cash basis accounting?
Recogizes revenue when cash is received and records expenses when cash is paid
80
How would $2400 for a 1 year prepaid insurance policy be recorded based on accrural basis and cash basis?
Accrural: 2400/12 = 200 per month. $200 recorded as expense at the end of each month
Cash: $2400 recorded at the end of each month
81
What is time period assumption?
Assumption that a business's activities can be divided into specific periods such as months or years
82
What is an annual financial statement?
Reports covering a one-year period
83
What is a fiscal year?
12 consecutive months that do not necesssarily follow the calendar year
84
What is an interim financial statement?
Statements that cover one, three, or six months of activity
85
What is revenue recognition principle?
Principle that requires that revenue be recorded when earned
86
What is matching principle?
Principle that aims to record expenses in the same accounting period as revenues that are earned as a result of these expenses
87
What is the major goal of the adjusting process?
To have revenue recognized (reported) in the same accounting period when it is earned
88
What are the different categories and accounts of adjustments?
Cash before Work (Deferrals)
* Unearned revenue
* Prepaid Expenses (including depreciation)
Work before Cash (Accrurals)
* Accrued revenues
* Accrued expenses
89
What are some Prepaid Expenses?
* Prepaid Insurance
* Supplies
* Repaid rent
* Depreciation
90
What are some Accrued Expenses?
* Accrued salaries
* Interest
* Rent
* Taxes
91
How do you journalize an adjustment?
Debit expense
Credit Asset or Liability
92
How do you journalize a depreciation of a long-term asset?
Debit Depreciation expense - (Object)
Cedit Accumulated depreciation expense - (Object)
93
How do you calculate the monthly depreciation expense of a long-term asset?
Monthly depreciation expense = (Cost - Salvage value)/Useful life in months
94
What is an unadjusted trial balance?
List of accounts and balances prepared before adjusting entries are recorded
95
What is an adjusted trial balance?
List of accounts and balances prepared after adjusting entries have been recorded and posted to the ledger
96
What is a book value?
Asset's original cost minus accumulated depreciation
97
What is another name for the monthly depreciation expense?
Straight-line depreciation method
98
What are plant assets?
Tangible long-lived assets used to produce or sell products and services
Also called property, plant, and equipment (PP&E) or fixed assets
99
What does an income summary with a credit balance signify?
Net Income
100
What does an income summary with a debit balance signify?
Net Loss
101
What is workplace fraud?
The use of one's job for personal gain, through the deliberate misuse of the employer's assets
102
What are the elements of workplace fraud schemes?
* Secretive
* Violates employee's duties to employer
* Done to provide direct or indirect benefit to employee
* Costs the employer money
103
What are the major types of workplace fraud?
1. Asset misappropriation: Theft or misuse of employer's resources
2. Corruption: Wrongful use of influence in a business transaction with the result that the employee receives financial gain at the expense of employer
3. Fraudulent financial statement: Falsification of employer's financial statements
104
What are some examples of asset misappropriation?
* Steal cash or inventory
* Disburse payroll checks to bogus employees
* Pay invoices to phony suppliers
* Accepting cash payments from customers but not recording sales
* Filing false expense reports
* Claiming overtime for hours not worked
105
What is an example of corruption?
Bribery of another party by employee to take part in fraudulent invoice scheme
106
What are some examples of fraudulent finacial statements?
* Recording fictitious revenues
* Overstating certain asset values
* Hiding certain liabilities or expenses
107
What are some suspicious behaviors that could indicate fraud?
* Employee paid average salary buys fancy cars, clothes, boats, or homes
* Employee facing serious financial hardships, such as medical bills, loan or credit card payments
* Employee won't share duties or take vacations-might indicate fear of fraud being uncovered
* Employee is unusually irritable or defensive
* Employee is too close with suppliers-might indicate they are a fraud "team"
108
What are the principles of internal control?
* Establish responsibilities
* Maintain adequate records
* Insure assets and bond key employees
* Separate recordkeeping from custody of assets
* Divide responsibility for related transactions
* Apply technological controls
* Perform regular and independent reviews
109
What is a voucher system?
Set of procedures and approvals designed to control payments and the acceptance of obligations
110
What does the voucher system of control establish?
Procedures for:
* Verifying, approving, and recording obligations for eventual cash payment
* Issuing checks for payment of verified, approved, and recorded obligations
111
What is the document order for a voucher?
1. Purchase requisition
2. Purchase order
3. Invoice
4. Receiving report
5. Invoice approval
6. Check
112
What is a purchase requisition?
Document listing merchandise needed by a department and requesting it be purchased
113
What is a purchase order?
Document used by purchasing department to place an order with a seller (vendor)
114
What is an invoice?
Itemized record of goods, prepared by the vendor that lists the customer's name, items sold, sales prices, and terms of sale
115
What is a receiving report?
Form used to report that ordered goods are received and to describe the quantity and condition
116
What is an invoice approval?
Document containing a checklist of steps necessary for approving the recording and payment of an invoice; also called check authorization
117
When is a Cash Over and Short account used?
When cash in cash register do not equal the record of cash receipts
118
What effect does a Dr and Cr to Cash Over and Short account have?
Dr: Decrease income
Cr: Increase income
119
What are some controls for cash receipts by mail?
* Two people should be present for opening the mail
* The person(s) opening the mail enters a list (in triplicate) of money received which includes a record of:
* Sender's name
* Amount
* Explanation for why money is sent
120
Who receives the copies for the list of cash receipts by mail?
1. Cashier along with money to deposit
2. Recordkeeper to record in accounting records
3. Kept by clerks who opened the mail
121
What is a petty cash fund for?
Make small payments to pay for business expenses
122
How is a petty cash fund established?
Company cashier issues check for petty cash amount to petty cashier who then cashes the check at a bank and then places amount in secure location
123
What is the journal entry to establish a petty cash account?
Dr Petty Cash
Cr Cash
124
When is the petty cash fund account jounalized?
When establishing the account, increasing/decreasing the balance, or closing the account
125
What are signature cards?
Card used by bank employees which includes the signatures of each person authorized to sign checks on the bank account
126
What is an endorsement?
Written authorization transferring ownership of check
127
What are the basic types of endorsement?
Blank and restrictive
128
What is a blank endorsement?
Depositor signs back of check and the check is payable to bearer of check
129
What is a restrictive endorsement?
Depositor transfer check to specific person, business, or bank for specific purpose by adding words to restrict payment of check (i.e "For Deposit Only" or "Payable to XX Only")
130
What is an electronic funds transfer (EFT)?
Electronic transfer of cash from one party to another
131
What information do all bank statements contain?
* Beginning-of-period balance of depositor's account
* Checks and other debits decreasing the account during the period
* Deposits and other credits increasing the account during the period
* End-of-period balance of depositor's account
132
What is a bank reconciliation?
A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement
133
What are outstanding checks?
Checks written (or drawn) by depositor, deducted on depositor's records, and sent to payee, but not yet received by bank for payment at the bank statement date
134
What are deposits in transit (or outstanding deposits)?
Deposits made and recorded by depositor but not yet recorded on the bank statement
135
What are non-sufficient funds (NSF)?
Check that is deposited by a company that is uncollectable (usually due to the balance of the other party's account not being large enough to cover the check)
136
What bank reconciliation accounts go on the bank statement side and which are add and deduct?
* Outstanding deposits (add)
* Bank errors understating the bank balance (add)
* Outstanding checks (deduct)
137
What bank reconciliation accounts go on the book statement side and which are add and deduct?
* Unrecorded collections (add)
* Interest earned (add)
* Errors understating the book balance (add)
* Service charges (deduct)
* Errors overstating the book balance (deduct)
* NSF checks (deduct)
138
What is an employee?
Someone whose work is under the direction of the employer
139
What is an independent contractor?
Someone who performs a job for the employer but decides how to do the work
140
What is the Fair Labor Standards Act?
* Sets minimum wage at $7.25/hr (as of 2009)
* Sets 40 hours as the most an employee can be required to work per week at normal rate of pay
* Sets pay for employees who work more than 40hrs/week for 1.5x normal payrate for overtime hours
141
What is a Form W-4?
Employee's Withholding Allowance Certificate
A form which shows an employee's withholding allowance
142
What factors determine the withholding allowance amount?
* Employee's marital status
* Gross pay
* Number of withholding allowances the employee claims
143
What is withholding allowance?
Amount of federal income tax to withhold from an employee's pay
144
What is FICA?
Federal Insurance Contributions Act
Taxes assessed on both employers and employees for Social Security (Old Age, Survivors and Disabilities Insurance or OASDI) and Medicare (Health Insurance or HI) programs
145
What is the rate for FICA SS and HI?
* SS: 12.4% of first $106,800 (Employer: 6.2% Employee: 6.2%)
* HI: 2.9% of all amounts (Employer: 1.45% Employee: 1.45%)
146
What is salary and wages?
* Salary: fixed amount of compensation paid or received on a regular basis
* Wages: amount paid or received for work or services by the hour, day, week, or by number of units produced
147
What are the different time periods of pay and the number of checks employee will receive?
* Daily: 365
* Weekly: 52
* Bi-Weekly: 26
* Bi-Monthly: 24
* Monthly: 12
* Quarterly: 4
* Yearly: 1
148
What are payroll deductions?
Amounts withheld from employee's gross pay
149
What are some examples of payroll deductions?
* FICA SS and HI
* Federal Income Tax (FIT)
* State and Local Income Tax (SIT)
* Voluntary deductions
* Contributions for retirement and health plans
* Union dues
* Gifts to charity
150
What is net pay?
Gross pay minus all withholdings
Also known as take-home pay
151
How is the FIT withholding amount found?
Circular E
152
What is a payroll register?
Used to keep record of pay period dates, hours worked, gross pay, deductions, marital status, number of allowances, and net pay of each employee for each pay period
153
How is payroll journalized?
Dr: Wage Expense
Cr:
* FICA - SS Taxes Payable
* FICA - HI Taxes Payable
* Employee FIT Payable
* Employee SIT Payable
* Accrued Wages Payable
154
What is a payroll bank account?
Bank account used solely for paying employees
Each pay period an amount equal to the total employees' net pay is deposited in it and the payroll checks are drawn on it
155
What is the journal entry for paying employees from a regular bank account?
Dr: Accrued Wages Payable
Cr: Cash (Total amount or individualized amounts)
156
What is the journal entry for paying employees from a special payroll bank account?
First
Dr: Cash-Payroll Bank Account
Cr: Cash
Then
Dr: Accrued Wages Payable
Cr: Cash-Payroll Bank Account
157
What is an employee earnings record?
Record of an employee's net pay, gross pay, deductions, and year-to-date payroll information
158
What are some forms of payroll fraud?
Ghost employees
Overstated hours worked and salary rates
Overstated salesperson's commissions
159
What are some forms of payroll control?
* Employer must be careful in employee hiring and assign only the most-trusted employess to payroll activities
* Employer should review and verify all time sheets
* All employee payroll data should be kept in locked files with payroll clerk and employer having the only access
* Any changes to employees' withholding or voluntary deductions must be supported by authorization forms signed by employee
* Signer of payroll checks should verify data for each employee in payroll register
* Payroll checks should not be distributed by payroll clerk who prepared them
* Payroll clerk should not reconcile bank account
160
What is the employer identification number (EIN)?
A number issued by the federal government that uniquely identifies a business
161
How does a business obtain its EIN?
Completing a Form SS-4 which includes the business name, location, main activity, and estimated number of employees
162
What is the federal unemployment tax (FUTA)?
Payroll taxes on employers assessed by the federal government to support its unemployment insurance program
163
What is the state unemployment tax (SUTA)?
State payroll taxes on employers to support its unemployment programs
164
What are the tax rates for FUTA and SUTA?
FUTA
If not paying SUTA: 6.2% of first $7000
If paying SUTA: 0.8% of first $7000
SUTA
Determined by state
If SUTA + FUTA \< FUTA, then business pays lesser tax rate
165
What is a merit rating?
Rating assigned to an employer by a state based on the employer's record of employment
Companies with low employee turnover pay lower SUTA
166
What is workers' compensation insurance?
Insurance program that provides benefits to workers who are injured on the job
167
How often does the IRS tend to require new businesses deposit payroll taxes?
Monthly
168
How does the IRS determine how often a business deposits payroll taxes?
If the business pays SS, HI, and FIT that is:
* Less than $50k = Monthly depositor
* More than $50k = semiweekly depositor
If employers' total tax liability is less than $2500 in a quarter, no deposit is required for that quarter and employer just includes check for tax liabilities with tax return
169
What is the federal depository bank?
Bank authorized to accept deposits of amounts payable to the federal government
170
What is a federal reserve bank and authorized depository?
Federal reserve bank: bank that can accept payroll deposits from any business
Authorized depository: bank that can accept payroll deposits from its own checking account customers
171
What is a form 8109 and 8109-B?
8109: preprinted Federal Tax Deposit Coupon that is used when an employer deposits money into a federal depository bank
8109-B: Federal Tax Deposit Coupon used by new businesses or when the business does not have a supply of preprinted Forms 8109
172
What is a Form 941?
Employer's Quarterly Federal Tax Return: reports the employer's FIT withholdings, total SS taxes (EE + ER), and total HI taxes (EE + ER) for the quarter just ended
Due by the end of the next month
173
What is a Form W-2?
Wage and Tax Statement: annual report by an employer to each employee showing the employee's total earnings and deductions for the year just ended
174
What is a Form W-3?
Transmittal of Wage and Tax Statements: form submitted to Social Security Administration that reports total wages and tax withholding information for all employer's employees for year just ended
Due by last day of Feb after each calendar year-end
175
How are state unemployment taxes reported?
Employer's Quarterly Unemployment Tax Report must be filed which shows an employer's unemployment taxes owed
Check for amount is then deposited into federal depository bank
176
What is a Form 940 and 940-EZ?
940: IRS form used to report employer's FUTA on annual filing basis
940-EZ: Employer's Annual Federal Unemployment Tax Return that shows amount of FUTA employer owes for year
177
What is the EFTPS?
Electronic Federal Tax Payment System: Electronic replacement for Form 8109
178
How are federal unemployment taxes reported?
Form 940/940-EZ filed by Jan 31 after year ends (deadline is extended to Feb 10 if employer has made all tax deposits during the year on time)
179
What is merchandise?
Products or goods that a company acquires to resell to customers
180
What is a merchandiser?
Entity that earns net income by buying and selling merchandise; identified as either wholesalers or retailers
181
What is a wholesaler?
Intermediary entity that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers
182
What is a retailer?
Intermediary entity that buys products from manufacturers or wholesalers and sells them to customers; tend to sell both products and services
183
How is the sale of merchandise journalized?
Dr Cash or AR
Cr Sales
184
What is a sales discount?
Term used by a seller to describe a discount granted to buyers to who pay within the discount period
185
What are credit terms?
Description of the amounts and the timing of payments that a buyer (debtor) agrees to make in the future
186
What is EOM?
End of Month
187
What is a credit period?
Amount of time allowed before full payment is due
188
What is a cash discount?
Reduction in price of merchandise granted by a seller to a buyer when payment is made within the discount period
189
What is a discount period?
Time period in which a cash discount is available and the buyer can make a reduced payment
190
What does the term 2/10, n/30 mean?
2% discount if payment made within the first ten days and full payment due within 30 days
191
How do you journalize a payment made within the discount period?
Dr Cash and Sales Discounts
Cr Accounts Receivable - (Name)
192
What are sales returns?
Mechandise that customers return to seller after a sale
193
What are sales allowances?
Reduction in selling price of merchandise sold to customers due to merchandise being damaged or defective
194
What is the journal entry for a sale plus sales tax on credit?
Dr Accounts Receivable
Cr Sales and Sales Tax Payable
195
What is a credit memorandum?
Notification that the sender has credited the recipient's account in the the sender's record
196
What is unique about merchandise businesses compared to service businesses in terms of financial records?
Merchandise businesses record transactions in special journals
197
What are the special journals of merchandising businesses?
Sales Journal: Record credit sales
Cash Receipts Journal: Record cash receipts
Purchases Journal: Record purchases on credit
Cash Disbursement Journal: Record cash payments
198
What is the difference between a general journal and a special journal?
General journal: all-purpose journal for recording the debits and credits of transactions and events
Special journal: any journal used for recording and posting transactions of a similar type
199
What is an accounts receivable ledger?
Subsidiary ledger listing individual customer accounts
200
What is a subsidiary ledger?
List of individual sub-accounts and amounts with a common characteristic; linked to a controlling account in the general ledger
201
What is a controlling account?
General ledger account, the balance of which (after posting) equals the sum of the balances in its related subsidiary ledger
202
What numbers are entered below the column totals in the special journal?
Account numbers where the totals were posted in the general ledger
203
What is a schedule of accounts receivable?
List of balances for all accounts in the accounts receivable ledger and their total
204
What are the different types of cash receipts?
1. Cash from credit customer in payment of their accounts
2. Cash from cash sales
3. Cash from other sources
205
How do you journalize cash from credit customers?
1. Customer's name entered in Account Credited column
2. Amounts debited to Cash and Sales Discount (if any)
3. Amount credited to customer's account in Accounts Receivable Cr column
206
How do you journalize cash sales?
Amount for each cash sale is entered in Cash Dr column and Sales Cr column
207
How do you journalize cash from other sources?
Amount of cash entered into Cash Dr column and Other Accounts Cr column
208
What does it mean to foot and crossfoot?
Foot: Total the column (i.e Dr or Cr)
Crossfoot: Total Dr and Cr columns and compare to make sure they equal
209
What is merchandise inventory?
Products that a company owns and intends to sell
210
What is the list price?
Catalog (full) price of an item before any trade discount is deducted
211
What is a trade discount?
Reduction from a list or catalog price that can vary for wholesalers, retailers, and consumers
212
What is a purchase discount?
Term used by a purchaser to describe a cash discount granted to purchaser for paying within the discount period
213
What is a debit memorandum?
Notification that the sender has debited the recipient's account in the sender's records
214
What is FOB shipping point and destination?
FOB shipping point: buyer pays for shipping and ownership of item shifts to buyer as soon as item is picked up by carrier
FOB destination: seller pays for shipping and ownership of item shifts to buyer once item arrives at buyer's location
215
How is net purchases calculated?
Purchases - Purchase Discounts - Purchase Returns and Allowances + Transportation-In = Net Purchases
216
How is net sales calculated?
Sales - Sales Discounts - Sales Returns and Allowances = Net Sales
217
What is a schedule of accounts payable?
List of balances of all accounts in the accounts payable ledger and their totals
218
How is the adjustment for merchandise inventory journalized?
First
Dr Income Summary
Cr Merchandise Inventory
Then
Dr Merchandise Inventory
Cr Income Summary
219
Why are there two steps when journalizing the adjusting entry for merchandise inventory?
First step removes beginning inventory and second step adds ending inventory
220
How is cost of goods sold calculated?
Beginning Inventory
Plus: Net Purchases and Merchandise available for sale
Less: Cost of ending inventory or Ending Inventory
221
How is gross profit calculated?
Gross Profit = Net Sales - Cost of Goods Sold (CoGS)
222
How is Unearned (deferred) Revenue journalized?
First Entry:
Dr Cash
Cr Unearned Revenue
Second Entry (after time has passed):
Dr Unearned Revenue
Cr Revenue
223
What is the link of prepaid expenses to financial statements and the adjusting entry associated with it?
Balance sheet:
Asset overstated
Equity overstated
Income statement:
Expense understated
Adjusting entry:
Dr Expense
Cr Asset
224
What is the link of unearned revenues to financial statements and the adjusting entry associated with it?
Balance sheet:
Liability overstated
Equity understated
Income statement:
Revenue understated
Adjusting entry:
Dr Liability
Cr Revenue
225
What is the link of accrued expenses to finanical statements and the adjusting entry associated with it?
Balance sheet:
Liability understated
Equity overstated
Income statement:
Expense understated
Adjusting entry:
Dr Expense
Cr Liability
226
What is the link of accrued revenue to financial statements and the adjusting entry associated with it?
Balance sheet:
Asset understated
Equity understated
Income statement:
Revenue understated
Adjusting entry:
Dr Asset
Cr Revenue
