ACCT 2331: EXAM 1

CourseStructure object (209501) - University of Houston

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214 Cards in this Set

Front	Back
company that is legally separated from its owners	corporation
what is the advantage of being in a corporation	stockholders have limited liability
prevents stockholders from being held personally responsible for the financial obligations of the corporation	limited liability
resources of a company	Assets
amounts owed to creditors	liabilities
owners claims to resources	stockholders equity
basic accounting equation	assets=liabilities+stockholders equity
amounts earned from selling products or services to customers	revnues
costs of providing products & services	expenses
distributions to stockholders	dividends
cumulative amount of net income earned over the life of a company that has been kept in the business rather than distributed to stockholders as dividends	retained earnings
stockholders equity equation	common stock + retained earnings=total stockholders equity
financial statement that measures activities involving cash receipts & cash payments over an interval of time	statement of cash flows
we can classify all cash transactions into 3 categories: what are they?	operating, investing, financing
x cash flows include cash receipts & cash payments for transactions involving revenues & expenses	operating
x cash flows include cash transactions for the purchase and sale of investments & productive long-term assets.	investing
x assets are resources owned by a company that are thought to provide benefits for more than one year	long-term
x cash flows include cash transactions with lenders, such as borrowing money & repaying debt, and with stockholders, such as issuing stock & paying dividends	financing
which financial statement conveys a company's ability to generate profits in the current perio	income statement
the body of rules and procedures that guide the measurement and communication of financial accounting information is known as	gaap (generally accepted accounting principles)
borrow from the bank a. financing b. investing c. operating	a. financing
provide services to customers a. financing b. investing c. operating	c. operating
issue common stock to investors a. financing b. investing c. operating	a. financing
buy stock a. financing b. investing c. operating	investing
purchase land a. financing b. investing c. operating	b. investing
pay rent for current period a. financing b. investing c. operating	c. operating
pay dividends to stockholders a. financing b. investing c. operating	a. financing
purchase building a. financing b. investing c. operating	b. investing
owners' claim to the resources of a company	stockholders equity
what is the date for a balance shet	PREPARED FOR A SPECIFIC DATE
a net loss x retained earnings	decreases
the financial statement that displays a firm's financial position on a particular date is the	balance sheet
dividends paid to shareholders is on which financial statement	statement of stockholders equity
which business organizations owners have unlimited liability	sole proprietorship & partnership
if investor or lenders were interested in the amount of debt a company currently has, which financial statement would they need?	balance sheet
if investors or leaders were interested in the amount of debt a company currently has, what financial statement would they need	balance sheet
when you use up assets it becomes	expenses
x accounting info is provided for internal users	managerial
x accounting info is used for external users	financial
are managers internal or external users	internal
what are the 2 primary functions of financial accounting?	1. measure business activities 2. communicate measures for decision makers
what is the basic accounting equation?	assets=liabilities+stockholders equity
what is the formula for the balance sheet	assets=liab+SE
owners claims are a. creditors claims are b.	a. SE b. liabilities
assets are...	resources
what is the formula for the income statement?	revenues-expenses=net income
distributions to owners that are used in corporations	dividends
what is the opposite of dividends	withdrawals
2 parts of SE	retained earnings + common stock
investment of stockholders	contributed capital
is the profiters loss of business since startup less distribution to owners or stockholders	retained earnings
what are the 4 financial statements in order	1. income statement 2. statement of SE 3. balance sheet 4. statement of cash flows
revenues-expenses=	net income
corporation owners are known as	stockholders
does net income increase or decrease retained earnings	increases
do dividends increase or decrease retained earnings	decrease
will cash be found in an adjusting entry	NO
t account: where do you place the balance?	larger side
when you are closing an account and reducing the temporary accounts to zero, where do you transfer the amounts?	retained earnings
accumulated depreciation is an example of a	contra-asset account
if 1 year of rent is paid in advance on January 1st, 2015 and was debited to prepaid rent. what adjusting entry is needed to adjust on 1/31/2015? a. debit prepaid rent, credit cash b. debit rent expense, credit prepaid rent c. debit rent expense, credit unearned revenue	b. debit rent expense, credit prepaid rent
another name for 'statement of financial position'	balance sheet
what is a fiscal year	june-may
process of transferring info from journal to the ledger is called	posting
accounts payable. a. classification b. normal balance	a. liability b. credit balance
expenses: a. increase/decrease SE b. normal balance is credit or debit	a. decrease b. debit
what is the normal sequence of info in an accounting system?	source document, journal, ledger
the adjustment that allocates the cost of a fixed asset over the periods benefited by it use is a. prepaid expense b. unearned revnue c. depreciation d. accrual	c. depreciation
the current assets section of the balance sheet should include a. machinery b. patents c. inventory d. goodwill	c. inventory
which is not correct form for an adjusting entry? a. debit to asset, credit to liability b. debit to a liability, credit to revenue c. debit to revenue, credit to liability	a. debit to asset, credit to liability
the matching principle controls a. where on the income statement expenses should be presented b. when costs are recognized as expenses on the income statement c. the ordering of current asets & current liabilites on balance shet	b. when costs are recognized as expenses on income statement
assumption that helps us classify things as current or long-term	going concern
assumption that reports on one business at a time	economic entity
events that affect the financial position of the company but do not include an exchange with a separate economic entity	internal transactions
summary of all transactions related to a particular item over a period of time	account
prepaid rent a. classification b. increases with a	asset b. debit
when you accrue revnue, you debit a x account, and credit a y account	x. receivable y. revenu
Purchasing a building for $110,000 by paying cash of $15,000 and signing a note payable for $95,000 will.. a. increase both total assets & liabilites by 95,000 b. increase total assets & liabilities by 110,000 c. decrease total assets and liabilites by 15,000 d. decrease total assets …	a. increase both total assets & liabilities by 95,000
after initially recording a transaction, data is copied or posted to a	ledger
which of the following accounts is increased with a debit? a. unearned revenue b. prepaid expense c. service revnue d. retained earnings	b. prepaid expense
Received utility bill, the bill will be paid at a later date. a. no note required b. debit utility expense, cr. cash c. debit utility expense, cr. utility pay d. dr utility payable, cr. utility expense	c. debit utility expense, credit utility payable
in accounting, the matching principle means to match which of the following? a. revenues-expenses b. expenses-liabilities c. expenses-revenues d. revenues-liabilities	c. expenses-revenues
which is true? a. assets=liab+cc-ret. earnings b. asses-liab=cc+ret earn c. assets+CC=liab+CC d. assets-liab+cc=re	b. assets-liab=cc+ret earnings
which of the following accounts is NOT on the balance sheet? a . unearned revneue b. salaries payable c. salaries expense d. supplies	c. salaries expense
a debt that a corporation owes to an outside party is called a	liability
an increase in an expense account could be balanced in a journal entry by a. a decrease in revenue account b. a decrease in a liability account c. a decrease in equity d. a decrease in an asset acount	d. a decrease in an asset account
A business acquire equipment for $140,000 on 1/1. Has life of 7 years and 0 salvage value. What is the required entry on 12/31? a. debit 140k to equip, credit 140k to cash b. debit 20k to depreciation expense & credit 20k to accumulated depreciation c. debit 20k to dp. exp., credit 20…	b. debit 20k to depreciation expense, credit 20k to accumulated depreciation
if net income is $80,000, dividend is $24,000, & ending retained earnings balance is $105,000. how much is beginning RE?	$49,000
Business collects a $5000 accounts receivable from its customers. how is the accounting equation afffected? a. assets increase by 5k, liab dec by 5k b. 1 asset increases by 5k, another one decreases by 5k c. assets increase by 5k, liabilities increase 5k d. assets inrease 5k, se incre…	b. 1 asset increases by 5k, another decrease by 5k
which of the following accounts have a normal debit balance a. assets & revenues b. liabilites & revnues c. expesnses & assets d. liabilites & retained earnings	c. expenses & assets
transactions are OG recorded in a	journal
which are decreased with a debit? a. asset & revenues b. liabilities & revenues c. expenses & assets d. liabilites & retained earnings	b. liabilites & revenues
when you record info in a journal entry, you are x a transaction	journalizing
on 8/1/2015, a business paid $6000 for 6 months rent. after adj. entries are made, what will be the balance of prepaid rent on 12/31/2015? a. 6000 b. 1000 c. 2000 d. 4000	b. 1000
(Read) Objectives of financial accounting are.. Information must be. 1. useful to investors & creditors in making decisions 2. helps to predict cash flow 3. tells about resources	------READ----
paying on accounts payable would result in a. DR cash, CR accts pay b. DR accts pay, CR unearned revenue c. DR accts rev, CR advertising expense d. DR accts payable, CR cash	D. DR accts payable, CR cash
a journal entry for a $75 payment for rent expense has posted as a debit to salary expense and credit to cash. no other mistake was made. this error willl cause what change?	sum of credits will still = sum of debit
what must result if rev-expenses is less than the amount of dividends paid? a. RE account increases b. company has positive net income c. company has net loss d. retained earnings account decreases	d. RE account decreases
Ending retained earnings equation is	Beginning retained earnings + net income -dividends = ERE
Those obligations of a firm that must be either paid in cash or settled by providing goods or services within 1 year are referred to as a. current liabilities b. current assets c. notes payable d. bonds payable	a. current liabilities
which of the following accounts would appear in the balance sheet debit column? a. unearned service revneue b. depreciation expense c. service revenue earned d. prepaid insurance	d. prepaid insurance
a corporation pas cash dividends. how does the payment of dividens affect the acct. equation? a. no effect b. assets decrease, SE decreases c. assets increase, liabilites decrease d. assets decrease, SE increases	b. assets decrease, SE decreases
A 2-year insurance policy in th amount of $2400 was purchase on 2/1 and was recorded by debiting the prepaid insurance account. At the end of the fiscal year on June 30th, 2015. the firm will have to recognize insurance epxense of a. 2400 b. 500 c. 1900 d. 1100	b. 500
at the end of the accounting period, the office supplies account shows a balance of $500, but the actual supplies on hand amount to only $300. if this situation calls for an adj. entry, what account should be debited? a. office supplies b. office supplies payable c .unused office suppl…	d. office supplies expense
on oct. 1st, a company receives $1000 from a customer as advanced payment for services to be rendered & credits unearned revenues @ time of receipt. by adj. JE at 12/31 would include a. debit to unearned revenue for $750 b. credit to unearned revenue for $750 c. debit to unearned reven…	a. debit to unearned revenue for $750
net income=15 liabilities 1/1=140 what are liabilities at 12/31/15 if no withdrawals or investements were made during the year?	$155
expanded accounting equation	assets=liabilities+CC+ret earnings+(rev-exp)-dividends
assets=liabilities+CC+ret earnings+(rev-exp)-dividends	accounts receivable
summary of the revenue and expenses for a specific period of time, such as a month or year. also called statement of earnings or profit & loss statement or statement of operations.	income statement
statement that reports the changes in the earnings that are retained in the business for a specific period of time, such as a month or a year AND the changes of stockholders equity.	statement of stockholders equity
summary. also called statement of financial position. list of the assets, liabilities, and SE as of a specific date, usually at the close of the last day of a month or year	balance sheet
summary of cash receipts (increases in cash) and cash payments (decreases in cash) for a specific period of time, such as a month or year	Statement of Cash flows
measurement rules that are used to determine the numbers that appear on the financial statements and how the statements are prepared	GAAP- generally accepted accounting prniciples
Cash: Statement found on?	Balance sheet
Inventory : Statement found on?	Balance sheet
supplies expense is found on which statement(s)?	income statement
equipment is found on which statement(s)?	balance sheet
land is found on which statement(s)?	balance sheet
accounts payable is found on which statement(s)?	balance sheet
interest payable is found on which statement(s)?	balance sheet
accounts payable is found on which statement(s)?	balance sheet
income tax expense is found on which statement(s)?	income statement
common stock is found on which statement(s)?	balance sheet
dividends is found on which statement(s)?	statement of SE
cost of goods sold is found on which statement(s)?	income statement
utilities expense is found on which statement(s)?	income statement
prepaid insurance is found on which statement(s)?	balance sheet
patents is found on which statement(s)?	balance sheet
accounts receivable is found on which statement(s)?	balance sheet
supplies is found on which statement(s)?	balance sheet
buildings is found on which statement(s)?	balance sheet
prepaid rent is found on which statement(s)?	balance sheet
accrued liabilities is found on which statement(s)?	balance sheet
unearned revnue is found on which statement(s)?	balance sheet
interest payable is found on which statement(s)?	balance sheet
additional paid-in capital- common stock is found on which statement(s)?	balance sheet
utilities payable is found on which statement(s)?	alance sheet
prepaid rent is found on the	balance sheet
prepaid insurance is classified as an	asset
patents are classified as an	asset
accounts receivable are classified as	assets
cost of goods sold are classified as	expenses
patents are classified as	assets
notes payable, current portion is found on which statement(s)?	balance sheet
patents is found on which statement(s)?	balance sheet
retained earning is found on which statement(s)?	statement of SE & balance sheet
how are liabilites listed	in order of due date
what liability will always be first	accounts payable
how quickly & easily something can be converted to cash	Assets
DIVIDENDS debit: increase/decrease credit: increase/decrease	debit increases credit decreases
EXPENSES debit: increase/decrease credit: increase/decrease	DEBIT INCREASES CREDIT DECREASES
ASSET debit: increase/decrease credit: increase/decrease	debit increases credit decreases
LIABILITIES debit: increase/decrease credit: increase/decrease	DEBIT DEC. CREDIT INC.
OWNERS EQUITYdebit: increase/decrease credit: increase/decrease	DEBIT DECREASE CREDIT INCREASE
REVENUES debit: increase/decrease credit: increase/decrease	DEBIT DECREASE CREDIT INCREASE
ACRONYM* DEA!LOR Dea- increases with debit, decreases with credit LOR- decreases with debit, increases with credit	read
which of the following transactions cause an increase in total assets? a. pay employee salaries for current month b. pay dividends to stockholders c. issue common stock in exchange for cash d. purchase office equipment for cash	c. issue common stock in exchange for cash
which of the following transactions causes an increase in SE? a. pay dividends to stockholders b. obtain cash by borrowing from a local bankk. c. provide services to customers on account d. purchase advertising on a local radio station	c. provide services to customers on account
an essential aspect of good investment decision. information is used to lead to more profitable investments.	net incomee
accounting in which we record revenues when we earn them (revenue recognition) and we record expenses with related revenues (expense recognition)	accrual-basis accounting
principle that states that we record revenue in the period in which we earn it	revenue recognition period
accounting in which we record revenues at the time we receive cash and expenses at the time we pay cash	cash-basis accounting
what does the adjusting entry for a prepaid expense always include?	debit to expense, credit to asset
when customers pay cash in advance, we debit x and credit a y	x cash y liabilitiy
Interest equation	principal x fraction of the year x annual interest rate
average time that it takes to provide a service to a customer & then collect that customer's cash	operating cycle
long-term productive assets used in the normal course of business, such as land, buildings, equipmnt, and machinery	propert, plant, equipment
assets that lack physical substance but hve long-term value to a company, such as patents, copyrights, franchises, & trademarks	intangible assets
closing accounts: ending retained earnings. draw pic of what it looks like	Retained Earnings Left side: total expenses & dividends Right side: beginning balance & total revenues Ending Balance is on larger side*
on may 5th, johnson plumbing receives a phone call from a customer needing a nw water heater and sschedules a service visit for may 7th. on may 7th johnson installs the new water heater. the customer pays for services on ma 10th. according to the revenue recognition principle, on which da…	May 7th (date of service)
which of the following accounts is NOT listed in a post-closing trial balance? a. prepaid rent b. accounts payable c. salaries expense d. retained earnings	c. salaries expense
which type of accounting is not accepted under GAAP?	cash-basis
which one is an example of a possible adjusting entry? a. dr cash & cr serv rev b. dr accts rec & cr serv rev c. dr acts rec & cr cash d. dr epxense & cr accts rec	b. dr accts rec & cr serv revenue
true or false: the ledger info that is summarized in the adjusted trial balance is the basis for the financial statements	TRUE
balance sheet accounts (i.e. assets, liablities, CC, & ret. earnings) are called x	permanent accounts
asset a. increases with b. decreases with	a. debit b. credit
liability a. increases with b. decreases with	a. credit b. debit
contributed capital a. increases with b. decreases with	a. credit b. debit
retained earnings/capital a. increases with	a. credit
revenue a. increases with b. decreases with	a. credit b. debit
gains a. increases with b. decreases with	a. credit b. debit
expenses a. increases with b. decreases with	a. debit b. credit
losses a. increases with b. decreases with	a. debit b. credit
dividends a. increases with b. decreases with	a. debit b. credit
which of the following is not depreciated? a. machinery b. land c. building d. equipment e. all of the above	b. land
true or false: companies listed on stock exchange only do yearly reports	false
which would not be a possible adjusting entry? a. accrued depreciation-equipment b. interest expense c. retained earnings d. service revenue	c. retained earnings
which is a correct sequential order of the accounting cycle? a. record OG entries & then record adjsting entries b. record in ledger & post to journal c. after posting, prepare a trial balance d. prepare financial statements	c. after posting prepare a trial balance
accrual of salaries earned but not yet paid a. what would you debit b. what would you credit	a. expense b. liability (salary expense, salary payable)
interest earned on a CD but not yet received a. what would you debit bb. what would yo ucredit	a. interest receivable (asset) b. interest revenue (revenue)
record transaction. "person deposited 45,000 cash in a businss bank and received common stock"	Cash (D) 45k common stock--45k (c)
record transaction. "defended a client in court, billed the client, and received his promise to pay the $800 within a week."	Accts Rec-800 (D) Service Revenue -800(c)
record transaction "paid for 2100 furniture that hd been recorded on account."	Accounts payable-2100 Cash ((c)-2100
record transaction "received partial payment from client on account $400"	cash (d) $400 accts receivalbe (c) $400
record Transaction "prepared legal documents for a client on account $600"	Accts receivable $600 service revenue (c) $600
Common Stock a. found on which statement? b. increased with?	a. balance sheet b. credit
Dividends a. found on which statement b. increases with	a. SE statement b. debit
prepaid insurance a. found on which statement b. increases with	a. balance sheet b. debit
prepaid rent a. found on which statement b. increases with	a. balance sheet b. debit
record transaction "provide service to customers on account for $2000"	accts receivable +2000 service revenue +2000
record transaction "receive cash in advance from customers $600"	cash increases $600 unearned revenue increases b $600
pay salries to workers: record	salarie expense decreases , cash decreases
record transaction: pay dividends to stockholders $200	dividends & cash decrease by $200
Record transaction "billed customers for cleaning services $1340"	accts rec 1340 --cleaning service revenue 1340
how do you prepare a trial balance?	list all accounts, and list their account balance on their normal balance side
explain on account/for credit	EARNING REVENUE-- ACTS. RECEIVABLE
record transaction: 'purchased $9800 of supplies for credit'	supplies 9800 accts payable - (c) 9800
received 1 year's rent in advance & prepare monthly statements. how is this recorded?	credit unearned revenue
i make a payment on account. how is this recorded?	debit accts payable
accounting required by gaap	accrual
true or false: adjusting entries are only concerned with income statment accounts	false
true or false: prepayments include prepaid asses & unearned revenues	true
straight line depreciation equation	cost-salvage/est. useful life in years
record transaction. "provide sevices worth $8000 to customers on account."	accts receivable debit 8000 service revenue credit 8000


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ACCT 2331: EXAM 1

214 Cards in this Set

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