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