Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
63 Cards in this Set
- Front
- Back
|
Accounting Cycle |
1. Analyze transactions 2. Journalize transactions 3. post to ledger accounts prepare trial balance journalize and post adjusting entries prepare adjusted trial balance prepare financial statements journalize and post closing entries prepare and post closing trial balance |
|
|
profit margin |
net income/net sales
|
|
|
gross profit rate |
net sales-COGS / net sales |
|
|
accrual |
accrued revenues: revenues for services performed but not yet received in cash or recorded; accounts receivable-service revenue,
accrued expenses: expenses incurred but not yet paid in cash or recorded interest payable-interest expense |
|
|
defferal |
prepaid expenses: expenses paid in cash before they are used or consumed prepaid insurance-insurance expense, acc. depr. - depr. expense
unearned revenues: cash received before services are performed unearned service revenue-service revenue |
|
|
income from operations is |
sustainable everything underneath that is unsustainable |
|
|
other revenues and gains |
interest revenue dividend revenue rent revenue gain |
|
|
other expenses and losses |
interest expense casualty losses loss (equipment ) loss (strikes, etc)
|
|
|
operating expenses |
salary and wage expense utilities advertising depreciation freight out insurance |
|
|
sales |
sales rev (less) sales returns and allwances (less) sales discounts
|
|
|
revenue recognition: Monday drop off dry clean, washed on Tuesday, Thursday it's paid for. When do you record this? |
Revenue is recognized when earned and payment is assured; expenses are recognized when incurred and the revenue associated with the expense is recognized.
Tuesday
revenue is recognized/recorded in the period in which it is earned expenses are recognized in the period in which it incurs (used up) |
|
|
calculate net sales |
sales rev - sales r&a - sales discount |
|
|
why these accounts require adjustment: prepaid insurance depreciation expense unearned service revenue interest payable |
a)to recognize insurance expired during the period. b)to allocate the cost of an asset to expense during the current period.
c)to account for unearned revenue for which services were provided during the period.
d)to recognize interest accrued but unpaid on notes payable during the current period.
|
|
|
account titles on which income statement? |
Balance Sheet: accumulated depreciation, service revenue, supplies, prepaid rent, prepaid insurance, unearned revenue, accounts receivable, interest payable, salaries and wages payable
Income Statement: Depreciation expense, dividends, supplies expense, rent expense, insurance expense, service revenue, interest expense, S&W expense |
|
|
accounts that appear in post-closing trial balance |
accumulated depreciation retained earningfs (end) supplies accounts payable |
|
|
periodicity assumption |
The economic life of a business can be divided into artificial time periods. |
|
|
expense recognition principle |
dictates that efforts (expenses) be matched with results (revenues) |
|
|
The generally accepted accounting principle which dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied is the |
revenue recognition principle
|
|
|
Which one of these statements about the accrual-basis of accounting is false? |
This basis is in accord with generally accepted accounting principles. |
|
|
In 2013, Costello Company performs work for a customer and bills the customer $10,000; it also pays expenses of $3,000. The customer pays Costello in 2014. If Costello uses the accrual-basis of accounting, then Costello will report |
revenue 10000 in 2013 |
|
|
Which statement is correct? As long as management is ethical, there are no problems with using the cash basis of accounting. |
The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles. |
|
|
Which of the following is not a type of adjusting entry? Accrued expenses |
earned revenues |
|
|
Adjusting entries are made to ensure that: |
revenues are recorded in the period in which the performance obligation is satisfied. |
|
|
Cash received before services are performed which is recorded as a debit to a Cash account and a credit to a liability account is called |
unearned revenue |
|
|
The difference between an asset's cost and its accumulated depreciation is called |
book value |
|
|
Cash received before services are performed are recorded as |
liabilities |
|
|
Adjustments for unearned revenues: increase assets and increase revenues. |
decrease liabilities and increase revenues
|
|
|
Adjustments for prepaid expenses: decrease assets and increase revenues. |
decrease assets and increase expenses
|
|
|
.Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be
Supplies $3,700 |
Supplies Expense $3,700 |
|
|
On September 1 the Petite-Sizes Store paid $12,000 to the Mega-Mall Co. for 3 months rent beginning September 1. Prepaid Rent was debited for the payment. If Petite-Sizes Store prepares financial statements on September 30, the appropriate adjusting journal entry to make on September 30 would be |
Rent Expense $4,000 |
|
|
On July 1, Mesa Verde, Inc. purchased a 3-year insurance policy for $12,600. Prepaid Insurance was debited for the entire amount. On December 31, when the annual financial statements are prepared, the appropriate adjusting journal entry would be:
Prepaid Insurance $10,500 |
Insurance Expense $2,100 |
|
|
At December 31, 2013, before any year-end adjustments, Macarty Company's Prepaid Insurance account had a balance of $2,700. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be |
1500 |
|
|
On August 1 the Darius Co. purchased a photocopy machine for $8,000. The estimated annual depreciation on the machine is $1,680. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be |
Depreciation Expense $700 |
|
|
Bonita Realty Management Co. received a check for $30,000 on October 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rental Revenue was credited for the full $30,000. Financial statements are prepared on December 31. The appropriate adjusting journal entry to make on December 31 would be Rent Revenue $22,500 |
Unearned Rent Revenue $7,500 |
|
|
On August 1, Luang Corporation signed a $30,000, 14%, 2-year note to help finance renovations being made to the corporation headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be Interest Expense $1,750 |
Interest Expense $1,750 |
|
|
Employees at the Waco Waffle House were paid on Friday, December 27 for the five days ending on December 27. The next payday is Friday, January 3. Employees work 5 days a week. The weekly payroll amounts to $3,800. The appropriate adjusting journal entry on December 31 would be to credit Salaries and Wages Payable for $1,520 |
1520 |
|
|
Financial statements can be prepared directly from the |
adjusted trial balance |
|
|
The following journal entries have been made during the closing process: |
RE increased by 4225 |
|
|
Which account will have a zero balance after a company has journalized and posted closing entries? |
service revenue |
|
|
Which types of accounts will appear in the post-closing trial balance? |
permanent accounts |
|
|
Which of the following correctly describes the closing process? |
net income/loss is transferred to RE |
|
|
The closing entry process consists of closing |
all temporary accounts |
|
|
the final step in the accounting cycle is to prepare |
a post closing trial balance |
|
|
Jax Company uses a perpetual inventory system and on November 30 purchased merchandise for which it must pay the shipping charges. Which of the following is one part of the required journal entry when Jax pays the shipping charges of $200? |
debt to inv for 200 |
|
|
Cosmos Corporation, which uses a perpetual inventory system, purchased $2,000 of merchandise on July 5 on account. Credit terms were 2/10, n/30. It returned $400 of the merchandise on July 9. Which of the following is one effect when Cosmos pays its bill on July 21?
Credit to Accounts Payable for $1,600 |
credit to cash for 1600 |
|
|
When credit terms of 1/15, n/60 are offered, how long is the discount period? |
15 days |
|
|
Which of the following items does not result in an entry to the Inventory account under a perpetual system? |
Payment of freight costs for goods shipped to a customer |
|
|
Marsh, Inc. paid for freight costs on merchandise it shipped to a customer. In what account will Marsh record this cost in a perpetual inventory system? |
freight out |
|
|
on what amount is a sales discount based? |
invoice price less returns & allowances
|
|
|
Myers and Company sold $1,800 of merchandise on account to Oscar, Inc. on March 1 with credit terms of 2/10, n/30. Oscar returned $500 of the merchandise due to poor quality on March 3. If Oscar pays for the purchase on March 11, what entry does Myers make to record receipt of the payment?
|
Cash 1,274 |
|
|
In a perpetual inventory system, which accounts will the seller credit when merchandise is returned by a customer? |
AR & COGS |
|
|
A retailer makes a $100 sale with terms of 2/10, n/30 on the first of the month. The customer returns $20 of merchandise for credit on account. What journal entry will the retailer record when payment is received within the discount period under a perpetual inventory system? |
Cash 78.40 |
|
|
Which of these accounts normally have a debit balance? |
both sales discounts and sales R&W |
|
|
A credit sale of $750 is made on June 13, terms 2/10, n/30, on which a return of $50 is granted on June 16. What amount is received as payment in full on June 23? |
686 |
|
|
Which one of the following statements is correct? |
A company which uses a perpetual inventory system needs two journal entries when it sells merchandise. |
|
|
What type of accounts are Sales Returns and Allowances and Sales Discounts? |
contra revenue accounts |
|
|
Sales revenue total to $10,000. Sales returns and allowances are $500 and sales discounts are $1,000. How much is net sales? |
8500 |
|
|
Net income is $15,000, operating expenses are $20,000, and net sales total $75,000. How much is cost of goods sold? |
40000 |
|
|
Assume that sales revenue are $450,000, sales discounts are $10,000, net income is $35,000, and cost of goods sold is $320,000. How much are gross profit and operating expenses, respectively? |
$120,000 and $85,000 |
|
|
Which of the following would appear on both a single-step and a multiple-step income statement? Gross profit |
cost of goods sold |
|
|
Which one of the following will result in gross profit? |
sales revenue less COGS |
|
|
A company has the following accounts balances: Sales revenue $2,000,000; Sales Returns and Allowances $250,000; Sales Discounts $50,000; and Cost of Goods Sold $1,275,000. How much is the gross profit rate? |
25% |
|
|
Net income is $15,000, operating expenses are $20,000, net sales total $75,000, and sales revenues total $95,000. How much is the profit margin? |
20% |
