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59 Cards in this Set

  • Front
  • Back

Net income=

Total revenues- total expenses

What section of a statement of cash flows indicates the cash spent on new equipment during the past accounting period?

The investing activities section

Which financial statement reports assists, liabilities, and stockholders equity?

Balance sheet

In a classified balance balance sheet, assets are usually classified as:

current assets; long-term investments, property, plant and equipment; and intangible assets.

Which is an indicator of profitability?

Earnings per share

Earnings per share (EPS)=

Net income- preferred dividends


average shares outstanding

The balance in retained earnings is not affected by:

Issuance of common stock

Which of these measures is an evaluation of a company's ability to pay current liabilities?

Current ratio


Debt to assets ratio

Total liabilities


total assets


Current ratio

current assets


current liabilities

Profitability can't be compared based on

current ratio, debt to assets ratio, earnings per share

What is the primary criterion by which accounting information can be judged?

Usefulness for decision-making

Neutrality is an ingredient of:

Faithful representation: yes

Relevance: No

The characteristic of information that evaluates whether it is large enough to impact a decision


The effects on the basic accounting equation of performing services for cash are to:

increase assets and increase stockholders' equity

Genesis Company buys a $900 machine on credit. This transaction will affect the:

balance sheet only

An account is an...

Individual accounting record of increases and decreases in specific asset, liability and stockholders' equity items


Increase assets and decrease liabilities


A revenue account:

Is increase by credits

Parts of the recording process:

Analyzing transactions, entering transactions in a journal, posting transactions

A trial balance:

Is a list of accounts with their balances at a given time

What is the periodicity assumption?

The economic life of a business can be divided into artificial time periods

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Expense recognition principle

Accrual- Basis accounts

Transactions recorded in the periods in which the events occur

Revenues are recognized when services performed, even if cash wasn't received

Expenses are recognized when incurred, even if cash wasn't paid

Major types of adjusting entry:

Prepaid expenses, accrued revenues, accrued expenses

Adjustments for unearned revenues:

decrease liabilities and increase revenues

If an employee works the last week of september and is paid october 1. The adjusting entry for the employer on september 30 would be shown as

Salaries and wages expense

Salaries and wages payable

The adjusted trial balance does..

list temporary accounts

Short-term liabilities=


Long-term liabilities=



the net value of the firm

Which of the financial statements is prepared on a specific date?

Balance sheet



Free cash flow=

cash provided _ capital _ cash

by operations expenditures dividends

The ledger is..

Comprised of the entire group of accounts maintained by a company


The process of transferring journal entry amounts to ledger accounts (T-account)

Revenue Recognition Principle

Companies recognize revenue in the accounting period in which the performance obligation is satisfied

Expenses Recognition Principle

Matches expenses with revenues in the period when the company makes efforts to generate those revenues

Cash Basis Accounting

Revenues are recognized only when cash is received

Expenses are recognized only when cash is paid

Book value=

Cost - accumulated depreciation

Retain earnings is the only account that..

Shows the original amount in the Adjusted Trial Balance

The adjusted Trial Balance purpose is..

To prove the equality of debit & credit balances in the ledger

Accounting Cycle

1. Analyze business transactions

2. Journalize the transactions

3. Post to Ledger accounts

4. Prepare a trial balance

5. Journalize&post adjusting entries

6. Prepare an adjusted trial balance

7. Prepare financial statements

8. Journalize &post closing entries

9. Prepare a post-closing trial balance

Temporary accounts


Revenue, expenses, income summary, dividends

Permanent Accounts:


Assets, liabilities, stockholders equity

Faithful representation-

Information accurately depicts what really happened. Must be complete, neutral and free from error

Going concern-

The business will remain in operation for the foreseeable future (longer than a year)

Cost constraint-

Weighs the cost of providing info. against the benefit that users will gain from the info.

Monetary unit-

Requires that only those things that can be expressed in money are included in the accounting records

Generally Accepted Accounting Principles (GAAP):

A set of rules & practices, having been recognized as a general guide for financial reporting purpose




Entering transaction data in the journal

Deferrals: Prepaid expenses-

Expenses paid in cash & recorded as assets before they are used

Deferrals: Unearned revenues-

Cash received before services are performed

Accruals: Accrued revenues-

Revenues for services performed but not yet received in cash or recorded

Accruals: Accrued expense-

Expenses incurred but not yet paid in cash or recorded

When closing the book:

Revenues and expenses are closed to..

The Income Summary Account

When closing the book:

Income summary account is closed to...

Owners Equity Account

Cost Principle

Requires that assets be recorded at the cash amount