Flashcards in Test #1 Deck (51):
What is the basic accounting equation?
assets = liabilities + owner's equity
Where would you see the basic accounting equation?
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
What appears on the Income Statement?
Revenues and Expenses
What appears on the Statement of Owner's Equity?
Capital and Drawing
What appears on the Balance Sheet?
Assets, Liabilities, and Owner's Equity
Is capital a permanent or temporary account?
Is drawing a permanent or temporary account?
Are assets a permanent or temporary account?
Are liabilities a permanent or temporary account?
Is revenue a permanent or temporary account?
Are expenses a permanent or temporary account?
How do you calculate net income?
net income = revenue - expenses
How many sections are in the Statement of Cash Flows? What are the sections of the Statement of Cash Flows?
Do you close or leave open temporary accounts?
How are T accounts set up?
Account title at the top
Debit on left side
Credit on right side
How do you number accounts in Chart of Accounts?
3- Owner's Equity
What order are assets listed in?
Assets are in the order of liquidy.
What order are expenses listed in?
Expenses are in the order of magnitude.
Where does Miscellaneous Expenses fall on the list of expenses?
What are the rules of debit and credit and normal balances?
DEAD means debit balance, if not in DEAD, it is a credit balance.
What does the acronym DEAD stand for?
Where can permanent accounts have activity on?
Both debit and credit side
Where can temporary accounts have activity on?
Only on normal side
What is unearned revenue classified as on the Chart of Accounts?
What is used to prepare financial statements?
Adjusted Trial Balance
What is the order of closing entries?
3. Income Summary
4. Owner's Equity (capital and drawing)
What is the purpose of a closing entry?
to 0 out an account
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.
What accounts will appear on the Post Closing Trial Balance?
Only Permanent Accounts:
- capital accounts
What is the only permanent account used in closing entries?
What are assets?
What the company owns
What are liabilities?
What the company owes
What is owner's equity?
Owner's claim to the assets
What are the people you owe money to called?
When should creditors be paid?
before all owners
What should be in the 3 line heading?
Financial Statement Name
What is the purpose of a Trial Balance?
total debits = total credits
Where do dollar signs go in financial statements?
first number in every column and above a double line
What does the income statement calculate?
What does the Statement of Owner's Equity calculate?
Ending balance of capital account
When are financial statements prepared?
monthly, quarterly, and annually
A listing of account titles in numerical order
Chart of Accounts
A listing of account titles and their account balance
What should you think when you see 'payable'?
What are prepaid expenses?
What are 6 examples of assets?
1. Accounts Receivable
5. Prepaid Insurance
What are 2 examples of liabilities?
1. Accounts Payable
2. Unearned Rent
What are 2 examples of owner's equity?
What is an example of revenue?