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From Flashcardlet > Principles of Accounting - Chapters 1 thru 3 > Flashcards

Principles of Accounting - Chapters 1 thru 3 Flashcards

1
Q

What is GAAP

A

Generally Accepted Accounting Principles

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2
Q

What are the GAAP Principles

A

Matching Principle
Accrual Accounting Principle
Cost Principle
Entity Assumption Principle (diff books diff entities)

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3
Q

What is the Basic Accounting Equation

A

Assets = Liabilities + Capital

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4
Q

What are Assets

A

resources a business owns.

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5
Q

What is a Liability

A

Something you owe

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6
Q

What is Capital

A

A measurement of worth. Total assets minus total liabilities

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7
Q

What can capital be increased by?

A

Investments by owner and revenue

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8
Q

What can decrease capital?

A

Withdrawals and expenses

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9
Q

What is the Expanded Accounting Equation

A

Assets - Liabilities = Capital

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10
Q

What does an Income Statement Show?

A

Revenues and Expenses for a period of time

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11
Q

What does a Balance Sheet show?

A

Assets, Liabilities and Capital on a specific date

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12
Q

What does a Trial Balance Show?

A

All debits and credits for a period of time. Proves the mathematical equality of debits and credits
after posting. Does not guarantee freedom from recording errors.

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13
Q

What does a Capital Statement Show?

A

Changes to capital for a period of time

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14
Q

What is the Double Entry System?

A

1 Debit for 1 Credit

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15
Q

What do Debits Do?

A

Increase assets and decrease liabilities

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16
Q

What do Credits Do?

A

Decrease Assets and Increase Liabilities

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17
Q

Normal Account Balance for Assets?

A

Debit

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18
Q

Normal Account Balance for Liabilities?

A

Credit

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19
Q

Normal Account Balance for Capital?

A

Credit

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20
Q

Normal Account Balance for Expenses?

A

Debit

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21
Q

A Debit to Assets does what?

A

Increases

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22
Q

A Credit to Assets does what?

A

Decreases

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23
Q

A Credit to Liabilities does what?

A

Increases

24
Q

A Debit to Liabilities does what?

A

Decreases

25
Q

A Credit to Capital does what?

A

Increases

26
Q

A Debit to Capital does what?

A

Decreases

27
Q

A Debit to Expenses does what?

A

Increases

28
Q

A Credit to Expenses does what?

A

Decreases

29
Q

What are the Steps in the Accounting Cycle?

A 
Analyze
Journalizing 
Posting to ledger / Footnoting / Account Balance
Trial Balance
Adjusting Journal Entries
Posting AJE to ledger
Adjusted Trial Balance
Financials - Income Statement / Capital Statement / Balance Sheet
30
Q

What is a Compound Entry?

A

An entry that requires three or more accounts

31
Q

What is Accrual Accounting?

A

Method by which revenues are recognized when earned (when services performed) and expenses when incurred (when we have the obligation to pay).

32
Q

Prepay / Prepaid = Unexpired Cost =

A

Asset

33
Q

Used = Expired =

A

Expense

34
Q

What is the Matching Principle?

A

Compares revenue earned vs. expenses incurred

35
Q

What are Deferred Expenses?

A

Recorded costs which must be apportioned between two or more accounting periods.

36
Q

What is Accumulated Depreciation?

A

Contra Asset

37
Q

Straight Line Depreciation formula

A

Asset Cost - Salvage or Residual Value / Useful Life

38
Q

What is Deferred Revenue?

A

Recorded revenues to be apportioned between two or more accounting periods

39
Q

What are Accrued Expenses?

A

Expenses incurred but not yet paid and must be recorded

40
Q

What is the AJE for Accrued Expense Entry?

A

Debit the expense and credit payable

41
Q

What is something that is Expired?

A

An Expense

42
Q

What is something that is Unexpired?

A

An Asset

43
Q

What is Accrued Revenue?

A

Revenues earned not yet received but must be recorded

44
Q

What is the AJE for Accrued Revenue Entry?

A

Debit receivables and credit revenue

45
Q

What is Accrual Accounting Matching Principle?

A

Deferred Exp, Deferred Rev, Accrued Exp and Accured Rev

46
Q

What is Depreciation?

A

The process of allocating the cost of an asset to expense over its useful life.

47
Q

What is Book Value?

A

Cost minus accumulated depreciation

48
Q

What is Revenue?

A

The amount billed for goods sold or services rendered

49
Q

What is the most generally accepted accounting principle?

A

Cost principle (from GAAP)

50
Q

Does an AJE affect net income or loss for a year?

A

Yes

51
Q

Trial Balance contains:

A

Trial Balance header
Name of Co.
Year ending

Assets (Cash, Equip, A/R)
Liabilities (a/p)
Capital (withdrawal/investment)
Revenue
Expenses
52
Q

Income Statement contains:

A

Income Statement header
Name of Co.
For year ended

Revenue
Expenses - then total operating expense
Net income

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53
Q

What is Net Income

A

The difference between revenue and expenses

54
Q

What are expenses

A

The cost of good purchased or services used in obtaining revenue. Recognized when incurred / obligation to pay arrises. If it lasts more than a year it is an asset.

55
Q

Liquidity Order:

A

Cash
a/r
Supplies
Auto / building / land

From Flashcardlet (10 decks)

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