Accounting 201 Exam #1

GAAP

Generally Accepted Accounting Principles — The rules and standards.

The Measurement and Actual Cost

To record at the actual cost.

What is the Fundamental Accounting Equation

Assets = Liabilities + Equity

Definition of Asset

What you own.

Definition of Liability

What you owe.

Definition of Equity:

The portion of assets “owned” by the owners.

Definition of Revenue:

Income

Definition of Expense:

The cost of doing business.

Definition of Dividend:

Earnings paid out to the owners.

Debit means:

LEFT

Credit means:

RIGHT

The value of an asset account increases with a __________

debit.

The value of a liability account increases with a __________

credit.

Two sub-categories of equity accounts increase with debits. Which are they?

Expenses and Dividends

The main purpose of the income statement is to?

Show the net income.

How do you calculate net income?

Revenue - Expenses

The main purpose of the statement of retained earnings is to?

To show how revenue changes over time.

Statement of Retained Earnings

Beginning Retained Earnings

+Net Income

-Dividends

= End Retained Earnings

The main purpose of the balance sheet is to?

Show a point in time. (A=L+E)

When dos a company get to recognize revenue? 

When it is earned.

How do you calculate a company’s debit ratio?

Total Liabilities / Total Assets

What does the term “posting a journal entry” mean?

Transferring financial transaction data from the general journal into the general ledger.

Cash

Asset

Accounts Receivable

Asset

Supplies 

Asset

Equipment

Asset

Accounts Payable

Liability

Common Stock

Equity

Dividends

Equity

Revenue

Equity

Expenses

Equity

Net Income is …

what is left over after you have paid all of your expenses.