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29 Cards in this Set
- Front
- Back
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Types of Adjusting Entries
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1. Unearned Revenue
2. Prepaid Expense 3. Accrued Expense 4. Accrued Revenue 5. Depreciation |
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Steps of Closing Process
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1. Close revenue accounts
2. Close expenses accounts 3. Close income summary account 4. Close owner withdrawals. |
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Year-End Worksheet
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1. Enter Trial Balance
2. Enter adjustments 3. Prepare Adjusted Trial Balance 4. Sort Adjusted Trial Balance to financial statement columns (Revenue and Expense accounts to Income Statement; Balance Sheet accounts to Balance Sheet and Statement of Owner's Equity columns) 5.) Total Statement Columns to computer Income Statement and Balance Sheet totals |
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Steps to Accounting Process (Order of entries)
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1.) Journal Entries
2.) General Journal 3.) General Ledger 4.) Trial Balance 5.) Adjustments 6.) Adjusted Trial Balance 7.) Prepare Financial Statements (Income Summary, Balance Sheet, Statement of Owner's Equity, Cash Flow) |
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Permanent Accounts
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Assets
Liabilities Capital |
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Temporary Accounts
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Revenues
Expenses Income Summary Owner Withdrawals |
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Define: Operating Cycle
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Time span from when cash is used to acquire goods and services until cash is received from the sale of goods or services.
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Current Assets
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Cash
Short Term Investments Accounts Receivable Inventory |
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Noncurrent Assets
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Long Term Assets
Plant Assets Intangible Assets |
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Current Ratio
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Current Asset
--------------------------- Current Liabilities Ability to pay company's short-term obligations (should be >1) |
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Net Income (Merchandising)
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Net Sales
- Cost of Goods Sold ---------------------------------- Gross Profit - Operation Expenses ---------------------------------- Net Income |
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Merchandise Inventory
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Asset; includes cost incurred to buy the goods, ship to store and make them ready for sale.
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Perpetual Inventory System
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Continually updates accounting records for inventory.
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Periodic Inventory System
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Updates accounting records for inventory ONLY at the end of a period.
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Journal Entry: Purchase of Inventory
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Dr Merchandise Inventory
Cr Accounts Payable or Cash |
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Journal Entry: Sell Inventory to Customer
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Dr Accounts Receivable
Cr Revenue Dr Cost of Goods Sold Cr Inventory |
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Journal Entry: Return product we purchased on credit
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Dr Accounts Payable
Cr Inventory |
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Journal Entry: Received returned inventory (non-defective) from customer
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Dr Sales Returns
Cr Accounts Receivable Dr Inventory Cr Cost of Goods Sold |
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Journal Entry: Record Purchase Discount
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Dr Accounts Payable
Cr Cash Cr Inventory |
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Journal Entry: Record sales discount
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Dr Cash
Dr Sales Discount Cr Accounts Receivable |
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Journal Entry: Record Shipping Charges
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FOB: Shipping Point (Buyer pays)
Dr Inventory Cr Cash FOB: Destination (Seller pays) Dr Shipping Expense Cr Cash |
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Acid Test Ratio
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"Quick Ratio"
Ability of merchandisers to pay liabilities Cash + Short Term Investments + Receivables ---------------------------------------- Current Liabilities |
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Gross Margin Ratio
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The amount that remains after COGS to pay operating expenses.
Net Sales - COGS ---------------------------- Net Sales |
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Closing Entires (Specific to Merchandising)
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Dr Sales
Cr Income Summary Dr Income Summary Cr Sales Discounts Cr Sales Returns & Allowances Cr Cost of Goods Sold |
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Journal Entry: Adjusting Inventory
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Dr Cost of Goods Sold
Cr Inventory |
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Goods in Transit
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Recorded in inventory based on shipping method:
FOB: Destination - seller keeps on books until delivered FOB: Shipping Point: Buyer puts on books when when items are shipped. |
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Goods on Consignment
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Consignor keeps inventory until sold by retailer.
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Goods Damaged or Obsolete
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Not accounted for in inventory if they cannot be sold
If can be sold at a reduced rate, recorded at a conservative rate of their net realizable value which is sales price - cost of making sale. |
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Costing Methods
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1.) Specific Identification
2.) First in-first out FIFO* 3.) Last in, last out LIFO 4.) Weighted Average *Most commonly used |
