ACG 2001 Final Exam

What are the three types of financial statements?

income statement, statement of owner’s equity, balance sheet

what is the income statement

describes a company’s revenue and expenses and calculates the net income or loss over a period of time

what is the statement of owner’s equity

a statement that displays the beginning capital, along with the events that increases capital (such as investments and net income) and the events that decreases capital (withdrawals and net loss)

what is the balance sheet

describes a company’s financial position (such as the types and amounts of assets, liabilities, and equity) at a specific point in time

What is the income statement equation?

revenues - expenses = net income (or net loss)

Where to find information for the income statement?

revenues and expenses are found in the equity column

What is ALICE

an acronym used to determine how debits and credits affect different accounts

What does ALICE stand for?

Assets, Liabilities, Income/Revenue, Capital, Expenses

When debited, what effects occur to ALICE?

assets and expenses are incremented, whereas liabilities, income, and capital are decreased

When credited, what effects occur to ALICE?

liabilities, income, and capital are incremented, whereas assets and expenses are decreased

what are journal enties

formal records of the business transactions, listed in chronological order

What is the equation for statement of owner’s equity?

beginning capital + investments + net income - withdrawals = ending capital

How are journal entries recorded?

to record journal entries, at least two accounts are involved, requiring one account to be debited and one account to be credited, as well as ensuring that the total amount being debited must equal the total amount being credited

How to record journal entries

to record journal entries, date the transaction on the first line of each journal entry, enter the titles of the accounts being debited and then enter the amount in the debit column of the same line, enter the titles of the accounts being credited and then enter the amount in the credit column, and enter a brief explanation of the transaction on the line below the entry

How to do adjusting entries

(1) determine what the current account balance equals, (2) determine what the current account balance should equal, (3)record the adjusting entry to get from step 1 to step 2

what is an adjusting entry

a journal entry at the end of the accounting period where the asset or liability account is brought to its proper amount and update the related expense or revenue account

When should adjusting entries be made?

should be made at the end of the accounting period after the unadjusted trial balance is prepared but before the final financial statements are issued