Double-Entry Accounting and Ratios – Fill in the Blank Flashcards

A set of fill-in-the-blank flashcards covering double-entry fundamentals, transaction examples, accrual vs. cash basis concepts, and basic ratio analysis.

In the double-entry system, each transaction has equal and opposite effects, so the accounting __.

equation

Issuing common stock for cash increases Cash by __.

30,000

Paying 900 cash for office rent reduces Cash by __.

900

Purchasing office equipment for cash increases Equipment by __.

3,400

Advertising purchased on account creates Accounts Payable of __.

200

Paying 500 cash for office supplies reduces Cash by __.

500

Revenue earned from services is recognized, increasing Retained Earnings by __.

12,000

Cash received from customers totaling 3,000 increases Cash by __.

3,000

Accounts receivable increases by __ when services are performed on account.

9,000

Salaries paid in cash of 1,800 reduce Cash by __.

1,800

Cash dividends paid reduce Retained Earnings by __.

400

Under accrual accounting, revenue is recognized when the service is __.

performed

Under accrual accounting, expenses are recognized in the period when the related __ are generated.

revenue

Unearned revenue is a __ liability.

liability

Current ratio is calculated as total current assets divided by total __.

current liabilities

Debt to asset ratio equals total debt divided by __.

total assets

Working capital equals current assets minus __.

current liabilities

Asset test ratio uses cash and __, excluding inventory and prepaid expenses.

accounts receivable

Debt to equity ratio compares total debt to __.

equity

Net income equals __ minus expenses.

revenue

Three main categories of financial ratios are profitability, liquidity, and __.

solvency

Under cash basis, revenue is recognized when cash is __.

received

Under cash basis, expenses are recognized when cash is __.

paid

Accrual basis requires that expenses be matched to the revenues in the period in which they are __.

incurred

Key financial statements used to compute ratios include the income statement, balance sheet, and __.

cash flow statement