Exam 1

Question 1

Transfer products and services to a customer today and expect to collect cash in the future

Answer 1

Credit Sales

Question 2

Cash owed to the company by its customers from sales or services on account

Answer 2

Accounts Receivable

Question 3

Reduction in list price of a product or service

Answer 3

Trade Discounts

Question 4

Customer returns a product

(a) Seller issues a cash refund if original sale was for cash
(b) Seller reduces balance of accounts receivable if original sale was on account

Answer 4

Sales Return

Question 5

Customer does NOT return a product

seller reduces the customer’s balance owed to provide at least a partial adjustment of the amount the customer owes.

Answer 5

Sales Allowances

Question 6

Offer a customer a reduction if payment is made within a specified period of time

Answer 6

Sales Discount

Question 7

Considers the age of receivables
Older accounts are more likely uncollectible
More accurate than using a single percentage

Answer 7

Aging Method

Question 8

Revenues are recorded in the period in which the goods or services are provided to customers

Answer 8

Revenue recognition principle

Question 9

Expenses are reported in the same period as the revenues they help to generate

Answer 9

Expense recognition principle

matching principle

Question 10

are the costs of assets acquired in one period that will be recorded as an expense in a future period
When paid, costs are initially recorded as assets because they provide future benefits

Answer 10

Prepaid Expenses

Question 11

occur when a company receives cash in advance from customers

Cash received is initially recorded as a liability because there is an obligation to the customer

Answer 11

Deferred Revenue

Question 12

are recorded when a company has a cost that is used to help produce revenue but hasn’t yet paid cash for that cost

Answer 12

Accrued Expenses

Question 13

When a company provides products or services to customers but hasn’t yet received cash, it records the revenue and an asset for the amount expected to be received

Answer 13

Accrued Revenues

Question 14

The process of allocating the cost of an asset, such as equipment, to expense over the asset’s useful life.

Answer 14

Depreciation

Question 15

Measures activities involving cash receipts and cash payments
Reflects a company’s operating, investing, and financing activities

Answer 15

Statement of Cash Flows

Question 16

Accounting Equation

Answer 16

Assets= Liabilities+ Stockholders Equity

Question 17

Summary of all transactions related to a particular item over a period of time

Answer 17

Accounts

Question 18

Examples: Cash, Supplies, and Equipment

Answer 18

Asset accounts:

Question 19

Examples: Accounts Payable, Salaries Payable, Utilities Payable, and Taxes Payable

Answer 19

Liability accounts:

Question 20

Examples: Common Stock and Retained Earnings

Answer 20

Stockholders’ equity accounts:

Question 21

increase retained earnings

Answer 21

Revenues

Question 22

decrease retained earnings

Answer 22

Expenses

Question 23

decrease retained earnings

Answer 23

Dividends

Question 24

debit up credit down

Answer 24

Assets, Expenses, Dividends

Question 25

Debit down Credit Up

Answer 25

Liabilities, Stockholders Equity, Common Stock, Retained Earnings, Revenue

Question 26

provides a chronological record of all transactions

Answer 26

Journal

Question 27

format used for recording transactions

Answer 27

Journal entry

Question 28

: process of transferring the debit and credit information from the journal to individual accounts in the general ledger

Answer 28

Posting

Question 29

provides in a single location the list of transactions affecting each account and the account’s balance

Answer 29

General ledger