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225 Cards in this Set

  • Front
  • Back
Which financial statement is prepared first?
Income Statement.
What is included on the Income Statement?
Revenues, Expenses, shows net income or loss.
Which statement uses the net income or loss?
Statement of Retained Earnings.
Which financial statement is prepared second?
The Statement of Retained Earnings.
What is on the Statement of Retained Earnings?
Beg Retained Earnings bal + Net Income or loss - Dividends = Retained Earnings bal at End of period.
Which statement is prepared third?
The Balance Sheet.
What is on the Balance Sheet?
Final bal of each element of the Accounting Equation. Ending bal of Retained Earnings from Statement of Retained Earnings flows to the Balance Sheet.
Which statement is prepared last?
The Statement of Cash Flows.
What are the three cash flow categories?
Cash flows from operating activities, cash flows from investing activities, cash flows from financing activities.
What does the Statement of Cash Flows do?
It explains the source/use of cash for a period under the three cash flow categories.
What is at the end of the Statement of Cash Flows?
The net increase or decrease in cash is shown reconciling the beginning cash balance to the ending cash balance reported on the Balance Sheet.
What is the period of the Statement of Retained Earnings?
From the beginning of the accounting period to the end of the accounting period.
What does the Statement of Retained Earnings do?
Calculates the change in retained earnings from the beginning of the accounting period to the end of the accounting period.
What is added to the beg bal of retained earnings?
Net income.
What is subtracted on the Statement of Retained Earnings?
Dividends.
In the Accounting Equation: Assets = ?
Liabilities + Stockholder's Equity.
In the Accounting Equation: Liabilities = ?
Assets - Stockholder's Equity.
In the Accounting Equation: Stockholder's Equity = ?
Assets - Liabilities.
What is the time period of the Balance Sheet?
Prepared on a certain date, similar to a snap-shot in time.
What is listed as the first asset on the Balance Sheet?
Cash.
What three items does the Balance Sheet report? On?
Assets, Liabilities, and Stockholder's Equity.
Whatr kind of account Is Supplies? On?
Asset. Balance Sheet.
What kind of account is Cash? On?
Asset. Balance Sheet.
What kind of account is Accounts Payable? On?
Liabilities. Balance Sheet.
What kind of account is Equipment? On?
Asset. Balance Sheet.
What kind of account is Interest Expense? On?
Expense. Income Statement.
What kind of account is Interest Payable? On?
Liability. Balance Sheet.
What kind of account is Accounts Receivable? On?
Asset. Balance Sheet.
What kind of account is Salary Expense? On?
Expense. Income Statement.
What kind of account is Building? On?
Asset. Balance Sheet.
What kind of account is Common Stock? On?
Stockholder's Equity. Balance Sheet.
What kind of account is Land? On?
Asset. Balance Sheet.
What kind of account is Notes Payable? On?
Liability. Balance Sheet.
What kind of account is Property Tax Expense? On?
Expense. Income Statement.
What kind of account is Rent Expense? On?
Expense. Income Statement.
What kind of account is Service Revenue? On?
Revenue. Income Statement.
What kind of account is Utilities Expense? On?
Expense. Income Statement.
What is the single most important item in the Financial Statements?
Net income.
All Payables are what kind of account? Listed where?
Liabilities. Balance Sheet.
Retained Earnings, end of yr = ?
Retained Earnings, beg yr + Net income - Dividends
Which Statement displays profitable or not?
Income Statement.
What kind of account is Retained Earnings? On?
Stockholder's Equity. Balance Sheet.
Which Statement displays who owns more of a company, the creditors or the stockholders?
The Balance Sheet.
Expenses are listed on which Statement?
Income Statement.
What must Assets on the Balance Sheet = ?
Total Liabilities + Stockholder's Equity
The valuation of assets on the balance sheet is generally based on?
Historical cost.
The first line of an Income Statement is the ?
Net sales.
What appears first on an Income Statement?
Revenues.
Does the order of the individual expense accounts on the Income Statement matter?
No.
Where are Collections posted?
Credit side of AR
Where are Write-offs posted?
Credit side of AR and debit side of Allowance for Uncollectible Accts
Where is the beg bal of Allowance for Uncollectible Accts posted?
Credit side of Allowance for Uncollectible Accts
Wherre are Uncollectible Acct Expenses posted?
Credit side of Allowance for Uncollectible Accts
What is the normal bal of the Allowance for Doubtful Accts?
This is a contra acct to the AR acct; its normal bal is a credit bal
Is the Allowance for Doubtful Accts cr bal used in the Balance Sheet?
Yes
Is the Doubtful-Account Expense bal used in the Balance Sheet?
No
How do you use the Allowance Method of accounting for uncollectible accounts?
When an account is written off an entry is made to debit the allowance for uncollectible accts and credit AR by the amt that is not expected to be collected; the write-off amt
Ralphie and 4 of his friends invested $100,000 each to open Buff; Incr, decr, or n/c to Total Assets?
Increase
Ralphie and 4 of his friends invested $100,000 each to open Buff; Incr, decr, or n/c to Stockholder's Equity?
Increase
Buff purchased warehouse for $150,000 (half cash, half loan); Incr, decr, or n/c to Total Assets?
Increase
Buff purchased warehouse for $150,000 (half cash, half loan); Incr, decr, or n/c to Stockholder's Equity?
n/c
Buff purchases and pays for 25,000 widgets at $3/widget. Incr, decr, or n/c to Total Assets?
n/c
The company purchases $1,000 of office supplies on acct. Incr, decr, or n/c to Total Liabilities?
Increase
Buff sells 10,000 widgets at $7/widget. COGS is $30,000. Incr, decr, or n/c to Net Income?
Increase
Buff sells 10,000 widgets at $7/widget. COGS is $30,000. Incr, decr, or n/c to Stockholder's Equity?
Increase
Buff pays for the supplies purchased on acct. Incr, decr, or n/c to Total Liabilities?
Decrease
Buff pays for the supplies purchased on acct. Incr, decr, or n/c to Net Income?
n/c
Buff collects $70,000 from customers on acct. Incr, decr, or n/c to Total Assets?
n/c
Buff collects $70,000 from customers on acct. Incr, decr, or n/c to Stockholder's Equity?
n/c
Buff declares and pays dividends of $5,000. Incr, decr, or n/c to Net Income?
n/c
Buff declares and pays dividends of $5,000. Incr, decr, or n/c to Stockholder's Equity?
Decrease
Buff counts supplies and notes that only $500 of the $1,000 remains. Buff makes the adjusting entry. Incr, decr, or n/c to Total Assets?
Decrease
Buff counts supplies and notes that only $500 of the $1,000 remains. Buff makes the adjusting entry. Incr, decr, or n/c to Stockholder's Equity?
Decrease
Buff buys inventory on acct for $560. Is this a deb, cr, or n/e to AP?
Credit
Buff sells inventory for $900 on acct. Based on COGS $540, is this a deb, cr, or n/e to Revenue?
Credit
Buff sells inventory for $900 on acct. Based on COGS $540, is this a deb, cr, or n/e to COGS?
Debit
On Jan 1, 2015 Buff buys $1,000 supplies. $500 remains. Buff makes the adjusting entry. Deb, cr, or n/e to Supplies acct?
Credit
On Jan 1, 2015 Buff collects $12,000 from selling Boulder Co a svc plan in which Buff agrees to svc Boulder Co's cars throughout the year for no charge. Deb, cr, or n/e for Revenue on Jan 1, 2015?
no entry
On March 31, 2015 Buff makes an adjusting entry to scv plan sales. Deb, cr, or n/e to Unearned Revenue?
Debit
Under accrual-basis acctg, the event that triggers revenue recognition?
Delivery of the goods to the customer
With an accrual of revenue?
The cash is received AFTER the revenue is recorded
Which accts are used in the adjusting entry to record salaries owed to employees, but not paid until the next acctg period?
Salaries Expense and Salaries Payable
Which financial statement reports BOTH net income and dividends?
Statement of Retained Earnings
In the accounting equation, which acct is included in Stockholder's Equity?
Revenue
Which accts are decreased with a debit?
Accts Payable
What accts do you debit and credit when receiving $500 related to a sale on acct the month before?
Debit Cash $500 and credit AR $500
Supplies beg bal $300. Supplies purchased $500. Ending bal $120. What amt and which accts do you debit and credit?
Debit Supplies Expense and credit Supplies $680
Which asset does not depreciate?
Land
Common stock issued $160K; AP pmt of $52K; accrual of salaries expense $84K. Net effect on SE?
Increase $76K
Acctg Equation =
Assets=Liabilities + Stockholder's Equity
Stockholder's Equity =
Paid-in Capital + Retained Earnings
Retained Earnings =
Revenues - Expenses - Dividends
Owner's Equity =
Beg bal RE +/- NI - Div = End bal RE
Full Acctg Equation =
Assets = Liabilites + Paid-in Capital + Rev - Exp - Div
Assets - Liabilities =
net Assets or Owner's Equity
Revenues - Expenses =
Net Income
TOTAL customers owe = AR + ADA (Allowances for Doubtful Accts) T/F?
True
How does the write-off of a receivable affect the NET AR bal?
No effect
Beg bal AR $300. $1600 credit sales. Ending bal $250. $100 written off. Cash collected =
$1550
To calculate COGS using FIFO =
Multiply qty x cost from first purchases up to amt sold.
To calculate Inv value using LIFO =
Remove sold items starting with last items purchased up to amt sold; multiply remaining qty x cost
What kind of acct is AR?
Asset
What kind of acct is Long-term Debt?
Liability
What kind of acct is Merchandise Inventory?
Asset
What kind of acct is Prepaid Expenses?
Asset
What kind of acct is Accrued Expenses Payable?
Liability
What kind of acct is Equipment?
Asset
What kind of acct is Notes Payable?
Liability
What kind of acct is Retained Earnings?
Stockholder's Equity
What kind of acct is Land?
Asset
What kind of acct is Accts Payable?
Liability
What kind of acct is Common Stock?
Stockholder's Equity
What kind of acct is Supplies?
Asset
Where can you find Net Income?
Income Statement, Statement of Retained Earnings, and Statement of Cash Flows
Where can you find Current Liabilities?
Balance Sheet
Where can you find Cash spent to acquire the building?
Statement of Cash Flows
Where can you find Adjustments to reconcile net income to net cash provided by operations?
Statement of Cash Flows
Where can you find Selling, general, and administrative expenses?
Income Statement
Where can you find Ending cash balance?
Balance Sheet, and Statement of Cash Flows
Where can you find Ending balance of retained earnings?
Statement of Retained Earnings, and Balance Sheet
Where can you find Income Tax Expense?
Income Statement
Where can you find Long-term debt?
Balance Sheet
Where can you find Revenue?
Income Statement
Where can you find Total Assets?
Balance Sheet
Where can you find Dividends?
Statement of Retained Earnings, and Statement of Cash Flows
Where can you find Income Tax Payable?
Balance Sheet
Where can you find Common Stock?
Balance Sheet
To increase an Asset account?
Debit
To increase a Liabilities account?
Credit
To increase a Common Stock account?
Credit
To increase the Retained Earnings account?
Credit
To increase the Revenue account?
Credit
To increase the Expense account?
Debit
To increase the Dividend account?
Debit
Which three accounts increase with a debit?
Assets, Expenses, and Dividends
Which four accounts increase with a credit?
Liabilities, Common Stock, Retained Earnings, and Revenues
To decrease Assets?
Credit
To decrease Liabilities?
Debit
To decrease the Common Stock acct?
Debit
To decrease the Retained Earnings acct?
Debit
To decrease the Revenue acct?
Debit
To decrease the Expense acct?
Credit
To decrease the Dividends acct?
Credit
Which three accts decrease with a credit?
Assets, Expenses, and Dividends
Which four accts decrease with a debit?
Liabilities, Common Stock, Retained Earnings, and Revenues
What happens to the Assets, Liabilities, and Equity accts when the company purchases $1,000 inventory on account?
+1,000 debit Asset acct Inventory, +1,000 credit Liability acct AP, no effect on Equity
What happens to the Assets, Liabilities, and Equity accts when the company pays $2,000 for purchases made on credit last year?
-2,000 credit Asset acct Cash, -2,000 debit Liability acct AP, no effect on Equity
What happens to the Assets, Liabilities, and Equity accts when the company purchases Land for $7,000 financed with a note payable?
+7,000 debit Asset acct Land, +7,000 credit Liability acct Note Payable, no effect on Equity
What happens to the Assets, Liabilities, and Equity accts when the company pays $500 cash for office supplies expect to last several years?
+500 debit Asset acct Supplies, -500 credit Asset acct Cash, no effect on Liabilities and Equity
What happens to the Assets, Liabilities, and Equity accts when the company pays $1,200 rent for the current month?
-1,200 credit Asset acct Cash, no effect on Liability, -1,200 debit Retained Earnings (rent expense)
What happens to the Assets, Liabilities, and Equity accts when the company pays $1,200 rent that was owed from last year?
-1,200 credit Asset acct Cash, -1,200 debit Liability acct Rent Payable, no effect on Equity
What happens to the Assets, Liabilities, and Equity accts when the company's employees were paid $1,000 for wages earned in the current month. They are also owed $500 for work performed during the last week of the current month to be paid next month.
-1,000 credit Asset acct Cash, +500 credit Liability acct Wages Payable, -1,500 debit Retained Earnings (wages expense)
What happens to the Assets, Liabilities, and Equity accts when the company declares $100 in dividends to be paid next month?
no effect on Assets, +100 credit Liability acct Dividends Payable, -100 debit Retained Earnings (dividends declared)
What happens to the Assets, Liabilities, and Equity accts when the company pays $500 cash for interest expense on the note payable?
-50 credit Asset acct Cash, no effect on Liabilities, -50 debit Retained Earnings (interest expense)
What is DEALOR?
Dividends, Expenses, Assets, Liabilites, Owner's Equity, Revenues
Owner Equity =
Common Stock + Retained Earnings
DEA
Increase with a debit, decrease with a credit
LOR
Decrease with a debit, increase with a credit
Prepaid Expenses result when we pay for something now that will be an ______ ______.
expense later
A "prepaid" asset will turn into an expense .....
as it is used up.
Unearned Revenue occurs when someone pays us in advance so we ...........
owe them a service or good. (retainer)
Unearned Revenue is not ________.
revenue
Unearned Revenue is a _______.
liability
Unearned Revenue will turn into Revenue ......
when we earn it
Accrued expenses are recorded now even though we will .....
pay for them later, a liability will exist during the in-between time (because we still "owe" it)
Accrued Revenues are revenues we have earned but .....
not yet received. Record an asset (ie. AR) until pmt is received in cash
Income Statement flows to the
Statement of Retained Earnings
Statement of Retained Earnings flows to the
Balance Sheet
Balance Sheet flows to the
Statement of Cash Flows
Income Statement is also called the
Statement of Operations
Income Statement reports the
Revenue and gains, Expenses and losses, Bottom line of net income or loss FOR THE PERIOD
Net Income increases
Retained Earnings
Net Losses and Dividends
decrease Retained Earnings
Retained Earnings are the
portion of net income reinvested into the business
The Statement of Retained Earnings shows what
the Company did with its Net Income
The Balance Sheet is also called the
Statement of Financial Position
The Balance Sheet reports the
Assets, Liabilities, Stockholder's Equity dated AT THE MOMENT IN TIME WHEN THE PERIOD ENDS
Statement of Cash Flows measures
cash receipts and payments
Statement of Cash Flows reports
operations, investments, and financing
The Income Statement reports the
revenues - expenses = Net Income, flows to Statement of Retained Earnings
Statement of Retained Earnings opens with
beg RE bal + NI (from Income Statement) - Div declared = end RE bal AT END OF YR, flows to Balance Sheet
Balance Sheet reports
assets, liabilities and stockholder's equity AT END OF YR
Statement of Cash Flows shows
ending cash and cash equivalents
Cash, AR, Prepaid Expenses, Inventory, Land, Building, Equipment, Furniture and Fixtures are all?
Asset accounts
AP, Notes Payable, and Accrued Liabilities are all?
Liability accounts
Common Stock, RE, Div are all?
Stockholders' Equity accounts
What is the single most important item in the financial statements?
Net Income.
Net Income from Income Statement reveals
whether a company is profitable
What should be the company's main source of cash?
Operating activities shown on Statement of Cash Flows
Cash and cash equivalents link to Balance Sheet from the
Statement of Cash Flows
Where can you determine if the company can sell its products?
From net sales revenue on the Income Statement
Main income measures to watch for trends?
Gross Profit (Sales - COGS), Operating Income (Gross Profit - Operating Expenses), Net Income (bottom line)
% of Sales Revenue as profit?
Net Income/Sales Revenue
Can a company collect its Receivables?
Balance Sheet: compare % increase in AR to % increase in sales. If AR is growing faster than sales, collections are slow
Can the company pay its current liabilities?
Balance Sheet: current assets should be > current liabilities
Can the company pay its current and long term liabilities?
total assets should be > total liabilities
Where is the company's cash coming from?
On Cash Flows Statement, operating activities should provide bulk of cash
DEAD CRLS (dead curls)
Debits increase: Exp, Assets, Div Credit increases: Revenue, Liabilities, Stockholder's Equity
Contra asset accts have normal
credit balances as opposed to asset accts which have normal debit balances
The Adjusted Trial Balance is the main source for
the financial statements
How do you Close the Revenue acct?
Debit Revenue, credit Retained Earnings
How do you Close the Expense acct?
Debit Retained Earnings, credit expense acct
How do you Close the Dividend acct?
Debit Retained Earnings, credit Dividend acct
What is the order of Balance Sheet assets and liabilities?
By order of liquidity, ie. Cash, AR, Inventory, Equipment and Buildings
Balance Sheet order of liquidity?
Current Assets, Long-Term Assets, Current Liabilities, Long-Term Liabilities
Criteria for current asset
Must be liquid, have intent and ability to convert to cash in 1 yr, or use to pay current liability
Who owns FOB Shipping Point
Buyer owns during shipping
Who owns FOB Destination
Seller owns during shipping
Writing off uncollectible accts has no
effect on assets
Consigned goods are not
included in inventory unless they are yours out on consignment
Inventory should be sold within 1 yr so it is
a current asset
Which Inventory Costing Method has first costs into inventory go to COGS?
FIFO
Which Inventory Costing Method has latest costs in ending inventory?
FIFO
Which Inventory Costing Method has last costs into inventory go to COGS?
LIFO
Which Inventory Costing Method has oldest costs in ending inventory?
LIFO
When Inventory costs are increasing, which Inventory Costing Method creates the highest Gross Profit?
FIFO COGS are lowest based on oldest costs
When Inventory costs are increasing, which Inventory Costing Method creates the lowest taxes?
LIFO EI is lowest based on oldest costs
When Inventory costs are decreasing, which Inventory Costing Method creates the highest Gross Profit?
LIFO COGS are lowest based on recent costs
When Inventory costs are decreasing, which Inventory Costing Method creates the lowest taxes?
FIFO EI is lowest based on recent costs
Which Inventory Costing Method provides more realistic net income figures?
LIFO
Which Inventory Costing Method provides a more up-to-date inventory cost?
FIFO
Which Inventory Costing Method has the most recent costs assigned to COGS?
LIFO
Which Inventory Costing Method has more recent costs on the Balance Sheet?
FIFO
What is Lower-of-Cost-or-Market Rule?
Requires that inventory be reported at lowest of historical cost or replacement cost (market value means inventory may be written down)
What Ending Inventory value is on Balance Sheet?
LCM