Financial Accounting Test 1
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- long term assets such as equipment, machinery, buildings,
- and land.
1. Tangible, physical assets
2.Used in normal operations
3. Not offered for sale in normal operations
a contract for the use of an asset for a period of time
- Accounted as if lessee has purchased asset. Debits an asset account for fair market value and credits
- long-term liability account
- if lessee is renting the asset.
- Debit Rent expense and credit Cash.
periodic recording of cost of fixed assets as an expense
- Debit Depreciation Expense and Credit Accumulated
- -Include all assets’ initial costs/over useful life/estimate residual
=Cost- Residual Value/Useful Life
Units of Production:
- Depreciation per unit=
- cost-residual value/ total units of production
Double Declining Balance
Step 1: Straight line percentage x 2
Intangible Assets: Do not exist physically
- Amortization: decline in the usefulness of the intangible
- Amortization Expense and Credit the Intangible Asset
Fixed Asset Turnover Ratio
- = Revenue/ avg.
- book value of fixed assets
are debt due beyond one year-paid back in installments
Short –Term Notes Payable
Note payable with interest on the amount of time.
- Notes Payable and Interest Expense Debit Cash
Pay including overtime pay before deductions
amount after deductions paid to the employee
contributions to social security and medicare
- Social Security Tax
- Medicare Tax
- Federal Witholding Tax
= quick assets/ current liabilities
Partnership Agreement includes matters such as
- amounts to be invested, limits on withdrawals distributions, admission and
- No legal liability
- Not Taxable
Limited Liability Company
Limited Legal Liability
- Unlimited Life
- Not taxable
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