ASU Accounting 231 EXAM #1 PREP

Which Entity is charged with developing the accounting standards in the U.S?

Financial Accounting Standards Board (FASB)

Whose mission is it to protect investors and maintain a fair and efficient stock market?

Securities and Exchange Commission (SEC)

What is the Accounting Equation

Assets = Liabilities + Stockholders' Equity

What is an asset?

A resource the company has the right to use in the future.

What is a liability?

A future obligation

What does Revenue Represent?

The amount received for providing a good or service to customers.

What does stockholders' equity represent?

The value of the shareholders (owners) interest in the company.

What is an expense?

A resource used up or a cost incurred to provide goods and services.

Revenues and Expenses are found on which financial statement?

The income statement

Which financial statement details the financial health of a company and is where Assets, Liabilities, and stockholders equity are found.

The Balance Sheet

Receiving cash from a customer who is paying off their account receivable:

Increases one asset and decreases another asset.

A Real Estate company received $12,000 cash for 24 months rent in advance. How should the Real Estate company record this transaction?

Debit Cash; credit Deferred Revenue.

3) Which of the following is possible for a particular business transaction?

Decrease assets; Increase assets

Which of the following accounts are increased with a debit?

Cash, an Expense, Dividends.

A Service Company provides services to customers totaling $3,000, for which it billed the customers. How would the transaction be recorded?

Debit Accounts Receivable $3,000, credit Service Revenue $3,000.

When a company pays $2,500 dividends to its stockholders, the transaction should be recorded as:

Debit Dividends; credit Cash.

When a company issues common stock for cash, what is the effect on the accounting equation for the company?

Assets increase and stockholders' equity increases.

Dividends paid and net losses:

reduce Retained Earnings.

What type of account is Deferred (Unearned) Revenue?

Liability

The audit opinion issued when the financial statements are fairly presented without exception is the:

unqualified opinion.

An increase to a liability account is shown with a ______________. A decrease to a liability account is shown with a ______________.

Credit; Debit

Expenses normally carry a _______ balance and are shown in the ______________.

Debit; Income statement

What type of account is Prepaid Expense?

Asset

A company received a $400 bill for advertising which ran in the current month. The company will pay the bill in 30 days. How will the transaction be recorded today?

Debit Advertising Expense $400, credit Accounts Payable $400.

Tyler Incorporated receives $150,000 from investors in exchange for shares of its common stock. Tyler Incorporated records this transaction with a:

Debit to Cash Credit to Common Stock.

The total revenues of $6,700, total expenses of $3,900 and dividends of $900 were recorded in the closing entries. The net income for the month was:

$2,800.

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much?

$34,000 increase.

When a company makes insurance payments in advance, this is an example of a(n):

Prepaid expense.

An increase to an asset account is shown with a ______________. A decrease to an asset account is shown with a ______________.

Debit; Credit

Providing services to customers and receiving cash from customers will:

Increase assets and increase stockholders' equity.

A company pays $18,000 cash for insurance coverage the next year. The appropriate debit and credit are:

Debit Prepaid Insurance $18,000, credit Cash $18,000.

Deferred (Unearned) revenues refer to:

Customers paying cash in advance of the good or service to be provided.

Which of the following transactions would cause an increase in both the assets and liabilities of a company?

Purchase of a building by issuing a note payable.

Merry Maids receives cash on the same day it performs cleaning services. These transactions would be recorded as:

Debit Cash, credit Service Revenue.

Which report details the activity in each account and keeps a running total?

General Ledger

The entry to close the revenue accounts includes:

debits to the respective revenue accounts and a credit to Retained Earnings.

Which of the accounts are increased on the credit side?

Liabilities, stockholders' equity, and revenues.

Assets normally carry a _______ balance and are shown in the ______________.

Debit; Balance sheet

Revenues have what effect on the accounting equation?

Increase stockholders' equity.

Purchasing office supplies on account will:

Increase assets and increase liabilities.

In November, a company hires three temporary employees that are scheduled to work only the month of December. Those employees work during December, and they are then paid their full salaries in January. In which month should the company record wages expense?

December.

Revenues:

Increase Retained Earnings.

Finding good reasons for doing things that we really know are wrong is an example of:

rationalization.