accounting 201 exam 1

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accounting 201 exam 1
2015-10-19 20:07:23
accounting 201
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  1. matching principle
    • guide account for expenses 
    • expenses are recorded when they are incurred during the period
    • expenses are matched against the revenue of the period
  2. 2 types of adjusting journal entries
    • deferrels 
    • accruals
  3. types of deferred expenses
    • prepaid rent
    • office supplies 
    • depreciation
  4. when does deferred revenue occur?
    occurs when a company receives cash before it does the work or delivers a product
  5. what is deferred revenue?
    deferred revue is a liability because the business owes a product or service
  6. accrued expenses-
    expenses a business has incurred but not yet paid
  7. types of Accrued expenses
    • salaries 
    • interest
    • utilities
  8. accrued revenue
    • performs a service but not yet collected cash
    • debit to accounts receivable
    • credit to service revenue
  9. adjusted trial balance
    • a summary of all accounts with adjusted balances
    • ensure total debits equal credits
    • ensures balance sheet items are properly valued
  10. 3 parts of financial statement
    • income statement
    • statement of retained earnings 
    • balance sheet
  11. income statement
    reports revenue and expenses and calculates net income or net loss for the period
  12. statement of retained earnings
    shows how retained earnings change during the period
  13. balance sheet
    reports assets, liabilities, and stockholders equity as of the last day of the period
  14. closing processes
    zeros out all revenues and expenses accounts in order to measure each periods net income separately from all other periods
  15. income summary
    account summarizes the net income or net loss for the epriod
  16. partnership
    • 2 or more owners
    • terminates at owners choice or death
    • partners personally liable
    • partnership not taxed, partners pay tax on their share of the earnings
  17. corporation
    • a business organized under state law that is a separate legal entity 
    • one or more owners(called stockholders)
    • corporation life span is indefinite
    • stockholders not personally liable
    • corporation pays tax
  18. equation for income statement
    revenues-expenses=net income or net loss
  19. statement of retained earning equation
    (beginning+net income or -net loss)-dividends for the period= retained earnings
  20. how to close accounts
    • 1. expenses on left income summary
    • 2. revenues on right side of income summary
    • 3. final income summary product moved to retained earning right side
    • 4. dividends on left side retained arnings
  21. post closing trial balance
    • a list of the accounts and their balance at the end of the period after journalizing and posting the closing entries
    • includes only permanent accounts
  22. merchandise inventory
    merchandise the business sells
  23. Cost principle
    goods and services should be recorded at their historical costs rather than current value
  24. monetary unit assumption
    the dollar is stable, it does not lose its purchasing power
  25. double entry bookkeeping
    every entry into an account requires a corresponding and opposite entry to a different account
  26. time period assumption
    divides ongoing activities in a business into periods of a year, quarterly, month, week
  27. equation for net sales
    sales- sales discount- sales returned and allowances=net sales
  28. equation for cost of goods available for sale
    beginning inventory+net cost of purchases= cost of goods available for sale
  29. equation for net cost of purchases
    purchases- purchase discounts-purchase returns and allowances+ freight in
  30. equation for cost of goods sold
    costs of goods available for sale- ending merchandise inventory=cost of goods sold
  31. periodic inventory
    physical count of inventory
  32. perpetual inventory
    computerized record of merchandise inventory
  33. weighted average equation
    cost of goods available for sale/number of units available=weighted average cost per unit
  34. journalizing
    debiting one account and crediting another
  35. fiscal year
    period used for calculating yearly financial statements in businesses and other organizations
  36. income summary
    • ledger account used in the closing stage of the accounting cycle, temporary
    • where all income statements revenue and expense accounts are transferred
  37. accounting
    • the information system that
    • - measures business activity
    • - processes the information into reports
    • - communicates the result to decision makers
  38. internal accounting what questions does it ask?
    • (managerial accounting)
    • 1. how much money does the business budget for production?
    • 2. should the business expand to a new location?
    • 3. how do actual costs compare to budgeted costs?
  39. External accounting
    • (financial accounting)
    • should i invest in the business?
    • is the business profitable?
    • should we lend money to the business?
    • can the business pay us back?
  40. what is GAAP?
    • generally accepted accounting principle
    • - relevant
    • -faithfully representative
  41. economic entity assumption
    an organization that stands apart as a separate economic unit
  42. sole proprietorship
    • one owner
    • terminates at owners choice or death
    • not separate taxable entity
    • small business
  43. list of assets
    • cash 
    • accounts receivable
    • notes receivable
    • prepaid expense
    • equipent, furnitures, and fixtures
    • building 
    • land
  44. list of liabilities
    • accounts payable 
    • notes payable 
    • unearned revenue
    • accrued liability
  45. List of equity
    • common stock -increase
    • dividends- decrease
    • revenues- increase
    • expenses-decrease
  46. account
    detailed record of all increases and decreases that have occurred in an account during a specific period
  47. chart of accounts
    used to organize a company's accounts
  48. ledger
    record holding all of the accounts of a business, the changes in an account, and their balances
  49. double entry system
    used to record dual effects of each transaction
  50. journal
    record of the transactions in date order
  51. posting
    transferring data from the journal to the ledger
  52. trial balance
    summary of the ledger listing all of the accounts with their balances
  53. cash basis accounting
    • revenue is recorded when cash is received 
    • expenses are recorded when cash i paid
    • not allowed under gaap
  54. accrual basis accounting
    • revenue is recorded when earned 
    • expenses are recorded when incurred
    • used by most businesses
  55. revenue recognition principle
    • dictates when to record revenue and the amount of revenue to record
    • record revenue when earned
    • maybe different from cash collections
    • revenue is based on the actual selling price of the items or service