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21 Cards in this Set
- Front
- Back
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net income equations
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revenue - expenses
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retained earnings equation
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beginning RE + NI - dividends
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gross profit equation
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net sales - COGS
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net purchases equation
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purchases - purchase returns & allowances - purchase discounts + freight in
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COGS equation
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beginning inventory + net purchases - ending inventory
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net sales equation
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sales - sales discount - sales returns & allowances - credit card discounts
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cash equation
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cash on hand + cash in banks + undelivered checks
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revenue recognition principle
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1. on site
2. shipped goods a. FOB shipping point- title transfers at shipment, buyer pays for shipping b. FOB destination- title transfers at delivery, seller pays for shipping |
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cash equivalents
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short term, highly liquid investments
maturity of 3 months |
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the allowance method
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records and estimate for bad debt expense at year end to follow matching.
reduce accounts receivable to their net realizable value |
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income statement method (A/R)
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uses % of credit sales
% x net credit sales = bad debt expense for the period |
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balance sheet method (A/R)
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uses % of ending A/R or an aging A/R
%est x A/R ending balance = ending allowance for doubtful accounts |
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journal entry to write off a/r as uncollectible
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ADA xx
A/R xx |
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journal entry to collect on an A/R that was previously uncollectable
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A/R xx
ADA xx Cash xx A/R xx |
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inventory costs
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ADD: sales tax, freight, insurance
DEDUCT: purchase discounts, purchase returns and allowances |
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gross profit method
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uses:
1. preparing quarterly financial statements 2.determining casualty losses and theft |
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strait-line depreciation
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historical cost - salvage value / useful life
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unit of production depreciation
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historical cost - salvage value / # units over life x units produced over year
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double declining depreciation
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1/UL x 2 x book value
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Journal entry for gain
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cash xx
accum dep. xx old asset xx gain on sale xx |
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journal entry for loss
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cash xx
accum dep. xx loss on sale xx old asset xx |
