Accounting I

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zoee203
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Accounting I
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2010-04-25 17:25:50
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accounting
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Accounting I quiz 1
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  1. What is a transaction?
    A record of what happened, what was sold, etc.
  2. What does GAAP stand for?
    Generally accepted accounting principles
  3. What is double entry accounting?
    Recording what you got and where it came from. Recording increases and decreases in accounts so that debits equal credits.
  4. What is the order of financial statements?
    • 1. Income statement
    • 2. Statement of owner's equity
    • 3. Balance sheet
    • 4. Cash flow statement
  5. What does a balance sheet tell you?
    Everything about the company. What it owes and what it owns.
  6. A servie business only has...
    income (revenue) and expenses
  7. What does FIFO stand for?
    First in first out
  8. What is equity?
    Your part - what is owed
  9. What is an asset?
    Something owned by the business
  10. Who adheres to GAAP?
    US, UK, Australia, and Canada
  11. What writing a journal entry what goes where?
    Debits on top.

    Credits on bottom.
  12. What is the normal balance of a liability account?
    Credit
  13. What is the normal balance of an Asset acccount?
    Debit
  14. What does profit mean?
    Difference between amounts recieved from customers for goods/services and amounts paid for the inputs used to provide those goods/servies.
  15. What does Cost Conepts mean?
    Amounts are initially recorded in accounting records at their cost or purchase price.

    How much an item was bought at.
  16. Who has first rights to assets?
    Creditors
  17. What is an accounts payable?
    Liability account created by purchasing on account (credit)
  18. What are prepaid expenses?
    Items that will be used in the business's future.

    Also assets
  19. What is an expense?
    Asset used in process of earning revenue

    Go in column next to fees earned.
  20. What is reported on an Income statement?
    Revenue and expenses for a period of time.
  21. What is net income?
    Excess revenue over expenses
  22. What is a net loss?
    When your expenses exceed your revenue.
  23. What is the difference between supplies and supplies expenses?
    Supplies- what business still has; goes on balance sheet.

    Supplies expense- supplies business has used up; goes on owner's equity
  24. How do you increase an asset?
    With a debit
  25. What does debit mean?
    put in,putting money in
  26. What does credit mean?
    Take out; taking money away
  27. How does owner's equity increase?
    With credit.
  28. How do you increase a liability on owner's equity side?
    Credit
  29. What does a chart of accounts do?
    Ids accounts
  30. What is a general journal?
    One journal for the entire store, not one for each dept.
  31. Where is cash on a chart of accounts?
    It's always the lowest number
  32. What is the role of Accounting?
    Provides information for mangers to use in operating the business

    To provide financial savings
  33. Define accounting...
    An information system that provides reports to users about the economic activites and condition of a business
  34. Who is responsible for developing accounting principles?
    In US FASB- Financial Accounting Standards Board

    Outside US IASB- International Accounting Standards Board
  35. Is FASB authoritative body?
    No- in US SEC (security and exchange commision) is
  36. What is a proprietorship? What are it's properties?
    Owned by one individual.

    • 70% of US businesses
    • Easy and cheap to organize
    • Resources limited to those of owner
    • used by small business
  37. What is a partnership? what are its properties?
    owned by 2 or more individuals

    • 10% of US businesses
    • combines skills and resources of more than one person
  38. What is a corporation? What are its properties?
    organized under stat or federal statutes as a separate legal taxable entity.

    • generates 90% of business revenue
    • 20% of businesses in US
    • ownership is divided into hsares called stock
    • an obtain large amounts of resoures by issuing stock
    • Used by large businesses
  39. What is a limited liability company? what are its properties?
    combines the attributes of a partnership and a corp.

    • 10% of US businesses
    • often used as an alternative to partnership
    • has tax and legal liability advantages for owners
  40. Can you use assets- liabilities= owner's equity?
    Yes, because if you have 2 parts of the equation you can use them to find the missing part.
  41. What is a special journal?
    designed to be used for recording a single type of transaction.

    i.e. journals seperated by depts.
  42. What is the business entity concept?
    Concept of accounting that limits the economic data in the acounting system to data related diretly to the ativites of the business
  43. What is an income statement?
    Summary of the revenue and expenses for a specific period of time.
  44. What is reported on an income statement?
    Revenue, expenses, and net income/loss
  45. How are expenses listed in income statement?
    in order of size beginning with larger items. Misc expense always shown last regardless of amount.
  46. What is example of income statement?
    • business name
    • (income statement)
    • period it is for

    • revenue (fees earned)................................................... goes on far right
    • (expenses:)
    • list seperate expenses here (misc goes last).......left of revenue
    • (total expenses).................................................. goes on far right
    • (net income/loss)......................................................... goes on far right
  47. What is the statement of owner's equity?
    summary of the changes in the owner's equity that have occurred during a specific period of time.
  48. What is an example of a statement of owner's equity?
    • business name
    • (statement of owner's equity)
    • period of time it's for

    • any initial capital made and date they were made.................................................. goes far right
    • any additional investments made and date made............................. goes inside left
    • Net income taken from income statement....................................... goes inside left
    • add all these up
    • less withdrawls............................................................................goes inside left
    • increase/decrease in owner's equity computation of all these................................... goes far right
    • owner's capital both far right items added/minus together....................................... goes far right
  49. What is a balance sheet?
    List of the assets, liabilities, and owner's equity as of a specific date. usually at the close of the last day of the month.

    present assets in order they will be converted into cash or used in operations
  50. What is an example of a balance sheet?
    • business name
    • (balance sheet)
    • date

    • (Assets) left side (Liabilities) right side
    • cash always goes first....... $$$ (accounts payable)..................... $$$
    • other assets will vary by business but examples are: other liabilities vary by business but ex are:
    • accounts recievable.......... $$$ wages payable.......................... $$$
    • supplies......................... $$$
    • land.............................. $$$ (owner's equity) right side
    • (total assets)................. $$$ (owner's capital) pulled from state of eo........ $$$
    • (total liabilities and owner's equity).............. $$$
  51. What is a statement of cash flows?
    Summary of cash receipts and cash payments for a specifi period of time.

    • consists of 3 sections:
    • operating activities
    • investing activities
    • financing activities

    must use summary of transactions to classify transactions
  52. What is cash flow from operating activities?
    reports summary of cash receipts and cash payments from operations.

    normally differs from from amount of net income for the period.
  53. What is cash flows for investing activities?
    reports cash transactions for the aquisition and sale of relatively permanent assets.
  54. what is cash flow from financing ativities?
    reports cash transactions related to cash investments by the owner, borrowings, and withdrawls by the owner.
  55. Example of statement of cash flows?
    • business name
    • (statement of cash flows)
    • period of time

    • (cash flows from operating costs:)
    • total of cash revenue............................goes inside left
    • total of cash used to pay for expenses.... goes inside left (this will be deducted)
    • (net ash flows from operating ativities......................................goes far right
    • (cash flows from investing activities:)
    • total of cash used for investments i.e. land............................... goes far right
    • (cash flows from financing ativities:)
    • total of cash from owner's investments... goes inside left
    • deduct total of cash withdrawals from owner.. goes inside left
    • (net cash flows from finaning activities)................................... goes far right
    • your total is cash as of next day of time period......................... goes far right
  56. what are the parts of an account?
    • 1. title which is name of accounting equation element recorded in the account
    • 2. spae for the recording increases in the amount of the element
    • 3. spae for recording drecreases in amount of the element
  57. what is a T account?
    • left side is debit side, increases in assets are recorded on this side
    • right side is credit side, decreases in assets are recorded on this side
  58. what is the balance of an account?
    the excess of debits of an asset account over its credits
  59. what is a ledger?
    a group of accounts for a business entity
  60. what is a chart of accounts?
    a list of accounts in the ledger

    accounts are listed in the order they appear in the financial statements

    1st number in chart of acounts indiates the major account group of the ledger in which the account is located. i.e. assets, liabilities, owner's equity, revenue, and expenses

    2nd number indicates it\s location of account within the group. where it falls within the assets, liability, etc. group
  61. what is a journal?
    where, using rules of debit and redit, transactions are initially entered.
  62. what is the normal balance of an account?
    either a debit or credit depending on whether increases in the acount are recorded as debits or credits.
  63. what is the normal balance of an asset account?
    debit
  64. what is the normal balance of a liability account?
    credit
  65. what is the normal balance of owner's equity?
    credit
  66. what is the normal balance of owner's drawing account/
    debit
  67. what is the normal balance of a revenue account?
    credit
  68. what is the normal balance of an expense account?
    debit
  69. what are the steps to journalizing?
    • 1. the date of the transation is entered in the date column (far left)
    • 2. the title of the acount to be debited is recorded at the left-hand margin under the Description column, and the amount to be debited is entered in the Debit column. (middle and to the right, respectively)
    • 3. title of the account to be credited is listed below and to the right of the debited acount tile, and the amount to be credited is entered in the credit column. (middle indented and to the far right, respectively)
    • 4. brief description may be entered below the crtedited account
    • 5. the post. ref. (posting reference) column is left blank when the jhournal entry is initially recorded.
  70. what is posting?
    Process of transferring debits/credits from jouinal entries to accounts in the ledger

    the debits/credits for each journal entry are posted to the accounts in the order in which they occur in the journal.
  71. what is the order in which you post?
    • 1. the date of the journal entry is entered in the DAte column of...(the ledger you are using)
    • 2. the amount is entered into the Debit column of... (the ledger you are using)
    • 3. the journal page number is entered in the Posting Reference column of... (ledger you are using)
    • 4. account number is entered in the posting reference column in the journal
  72. what type of account are prepaid expenses?
    assets
  73. what is unearned revenue?
    liability created by receiving cash in advance of providing a service.
  74. what is a trial balance?
    used to detect errors in posting debits/credits from journal to ledger.

    verifies equality of double-entry accounting
  75. what are the steps in preparing a trial balance?
    • 1. list the name of the company, the title of the trial balance, and the date the trial balane is prepared.
    • 2. list the acounts from the ledger and enter thier debit or credit balance in the Debit or Credit column of the trial balance
    • 3. Total the Debit and Credit columns of the trial balance
    • 4. Verify that the total of the Debit column equals the total of the Credit column
  76. what is the accounting equation?
    assets = liabilities + owner's equity

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