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Flashcards in Test #1 Deck (51):
1

What is the basic accounting equation?

assets = liabilities + owner's equity

2

Where would you see the basic accounting equation?

Balance Sheet

3

What is the order in which financial statements are prepared?

1. Income Statement
2. Statement of Owner's Equity
3. Balance Sheet
4. Statement of Cash Flows

4

What appears on the Income Statement?

Revenues and Expenses

5

What appears on the Statement of Owner's Equity?

Capital and Drawing

6

What appears on the Balance Sheet?

Assets, Liabilities, and Owner's Equity

7

Is capital a permanent or temporary account?

Permanent Account

8

Is drawing a permanent or temporary account?

Temporary Account

9

Are assets a permanent or temporary account?

Permanent Account

10

Are liabilities a permanent or temporary account?

Permanent Account

11

Is revenue a permanent or temporary account?

Temporary Account

12

Are expenses a permanent or temporary account?

Temporary Account

13

How do you calculate net income?

net income = revenue - expenses

14

How many sections are in the Statement of Cash Flows? What are the sections of the Statement of Cash Flows?

3 Sections
-financing activities
-operating activities
-investing activities

15

Do you close or leave open temporary accounts?

Close Out

16

How are T accounts set up?

Account title at the top
Debit on left side
Credit on right side

17

How do you number accounts in Chart of Accounts?

1- Assets
2- Liabilities
3- Owner's Equity
4- Revenue
5- Expenses

18

What order are assets listed in?

Assets are in the order of liquidy.

19

What order are expenses listed in?

Expenses are in the order of magnitude.

20

Where does Miscellaneous Expenses fall on the list of expenses?

Last

21

What are the rules of debit and credit and normal balances?

DEAD means debit balance, if not in DEAD, it is a credit balance.

22

What does the acronym DEAD stand for?

Debit
Expenses
Assets
Drawing

23

Where can permanent accounts have activity on?

Both debit and credit side

24

Where can temporary accounts have activity on?

Only on normal side

25

What is unearned revenue classified as on the Chart of Accounts?

Liability

26

What is used to prepare financial statements?

Adjusted Trial Balance

27

What is the order of closing entries?

1. Revenue
2. Expenses
3. Income Summary
4. Owner's Equity (capital and drawing)

28

What is the purpose of a closing entry?

to 0 out an account

29

Where is the only place an income summary can be found and what should it equal?

Income summary should only be found on closing entries and it should = net income.

30

What accounts will appear on the Post Closing Trial Balance?

Only Permanent Accounts:
- assets
- liabilities
- capital accounts

31

What is the only permanent account used in closing entries?

Capital Accounts

32

What are assets?

What the company owns

33

What are liabilities?

What the company owes

34

What is owner's equity?

Owner's claim to the assets

35

What are the people you owe money to called?

Creditors

36

When should creditors be paid?

before all owners

37

What should be in the 3 line heading?

Company Name
Financial Statement Name
Date

38

What is the purpose of a Trial Balance?

total debits = total credits

39

Where do dollar signs go in financial statements?

first number in every column and above a double line

40

What does the income statement calculate?

Net Income

41

What does the Statement of Owner's Equity calculate?

Ending balance of capital account

42

When are financial statements prepared?

monthly, quarterly, and annually

43

A listing of account titles in numerical order

Chart of Accounts

44

A listing of account titles and their account balance

Trial Balance

45

What should you think when you see 'payable'?

Liability

46

What are prepaid expenses?

Assets

47

What are 6 examples of assets?

1. Accounts Receivable
2. Cash
3. Land
4. Equipment
5. Prepaid Insurance
6. Supplies

48

What are 2 examples of liabilities?

1. Accounts Payable
2. Unearned Rent

49

What are 2 examples of owner's equity?

1. Drawing
2. Capital

50

What is an example of revenue?

Fees Earned

51

What are 4 examples of expenses?

1. Wages Expense
2. Rent Expense
3. Supplies Expense
4. Miscellaneous Expense