FINANCIAL ACCOUNTING ACG2021 FINAL REVIEW Chapter 1 Accounting Equation o Assets Liabilities Stockholders equity Stockholders equity o Common stock retained earnings net income dividends Net Income Revenue Expenses Income Statement Revenues Expenses Net Income Revenues Expenses Name of Company Income Statement Year Ended Month date yr Definition a financial statement listing an entity s revenues expenses and net income or net loss for a specific period also called the statement of operations Statement of Retained Earnings Statement of Retained Earnings Year Ended Month Date yr Name Company Beginning retained earnings Net Income Cash Dividends Ending retained earnings Beg Net DivFrom the Income statement you get the net income Balance Sheet A L SE has the entire equation Assets cash supplies land accounts receivable machines TOTAL ASSETS Liabilities Accounts payable notes payable TOTAL LIABILITIES Stockholders Equity Common Stock Ending Retained Earnings get from the statement of retained earnings don t need to add the net income already did Total Liabilities and stockholders equity MUST BE EQUAL TO ASSETS list of an entity s assets liabilities and owners equity as of a specific date Also called the statement of financial position Economic Entity assumption Cost principle Going concern assumption requires an organization to be a separate economic unit such as a sole proprietorship partnership corporation or limited liability company foreseeable future monetary unit Four Financial Statements Acquired assets and services should be recorded at their actual cost Assumes than an entity will remain in operation for the Assumes financial transactions are recorded in a Monetary unit assumption o Income Statement o Statement of Retained Earnings o Balance Sheet o Statement of Cash Flows 1 Match the following 1 Sole Proprietorship by the IASB 2 Faithful Representation over actual costs 3 Partnership Board IFRS 4 5 Corporation 6 Audit statements and records 7 Cost Principle 8 FASB U S financial markets 9 Creditors a set of global accounting guidelines formulated b Holds fair market value should not be used c Stands for Financial Accounting Standards d Owner is referred to as a proprietor e Asserts that accounting information should be f an examination of a company s financial g has two or more owners called partners h U S governmental agency that oversees the i Type of entity that is designed to limit personal complete neutral and free from material error liability exposure of owners to the entity s debts 10 SEC j Person or business lending money Answers 1 D 2 E 3 G 4 A 5 I 6 F 7 B 8 C 9 J 10 H 2 Identify users of accounting information external financial decision makers E or internal managerial decision makers I Internal Revenue Service a Customer b Company manager c d Lender e Investor f Controller accountant of company g Cost accountant h SEC Securities Exchange Commission Answers a E b I c E d E e E f I g I h E 3 What does GAAP stand for a Generally Accepted Accounting Principles b Generally Accepted Accounting Pronouncements c Generally Accepted Auditing Pronouncements d Generally Accepting Auditing Principles 4 Accounting is the information system that a Measures business activities b Communicates the results to decision makers c Process information into reports d All the above Answers A Answer D Answer C Answer A Answer C 5 Which of the following is not an external user of the business financial information a Taxing authorities b Customers c Employee d Investors 6 Generally Accepted Accounting Principles GAAP are currently formulated by the a Financial Accounting Standards Board FASB b Securities and Exchange Commission SEC c Institute of Management Accountants IMA d American Institute of Certified Public Accountants AICPA 7 Which type of business organization is owned by only one owner a Corporation b Partnership c Sole proprietorship d Items a b and c are all correct 8 At the end of a recent year Global Cleaning Service offers full service house and office cleaning service It had total assets of 3 630 and equity of 2 280 how much were global cleaning services liabilities a 5 910 b 3 630 c 1 350 d 2 280 Answer C a Net income of 3 900 b Net loss of 3 900 c Net income of 6 400 d Net income of 8 900 9 Consider the overall affects on global cleaning service from selling and performing services on account for 6 400 and paying expenses totaling 2 500 what is global cleaning services net income or net loss Answer A Answer B Answer A 10 Assume that Global Cleaning Service performed cleaning services for a department store on account for 180 How would this transaction affect Global Cleaning Services accounting equation Increase both assets and liabilities by 180 Increase both assets and equity by 180 Increase both liabilities and equity by 180 a b c d Decrease liabilities by 180 and increase equity by 180 11 The balance sheet reports the financial position on a specific date a b results of operations on a specific date c financial position for a specific period d results of operations for a specific period 12 Assume Global Cleaning Service had net income of 570 for the year Global Cleaning Services beginning and ending total assets were 4 520 and 4 180 respectively Calculate Global Cleaning Services return on assets ROA a 12 6 b 13 6 c 13 1 d 7 63 Answer C Return on Assets Net Income Average total assets Chapter 2 balances The normal balance of an account is the increased side of an account A ledger shows the increases and decreases in each account along with their Here is the debit or credit balance you would normally find in the account 1 The detailed record of the changes in a particular asset liability or stockholders equity is called a an account b a journal c a ledger d a trial balance Answer A Answer C 2 Which of the following accounts is a liability a Accounts Receivable b Service Revenue c Unearned revenue d Prepaid Rent Expense 3 The left side of an account is used to record which of the following Increases a Debit or Credit depending on the type of account b c Credits d Debits 4 Which of the following statements is correct a Prepaid Expenses are decreased with a debit b Unearned Revenue is increased with a debit c Rent Expense is increased with a credit d Accounts Payable is increased with a credit 5 Your business purchases Office Supplies of 2 500 on account The journal entry to Answer D Answer D Answer B Answer B record this transaction is as follows 2 500 a Office Supplies
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