account exam 1 sutdy

Deferred revenue

money a customer paid you in advance for service or product you haven't delivered yet.

prepaid rent (asset or liability)

asset

prepaid rent (current or long-term)

current

intangible assets (asset or liability)

asset

intangible assets (current or long-term)

long-term

Gross Profit

Profits directly related to the key costs needed to generate those revenues.

Net income

All revenues minus all expenses.

Operating income

Profits related to the operating activities of the company.

Pre-tax income

Profits before accounting for income taxes.

Operating Business Activity

Transactions related to revenues and expenses.

Financing Business Activity

Transactions with lenders and owners.

Investing Business Activity

Transactions involving the purchase and sale of productive assets.

Dividends (increases or decreases total stockholders’ equity)

Decreases stockholders’ equity

Stock repurchases (increases or decreases total stockholders’ equity)

Decreases stockholders’ equity

Stock issuance (increases or decreases total stockholders’ equity)

Increases stockholders’ equity

Net income (increases or decreases total stockholders’ equity)

Increases stockholders’ equity

Cash from selling merchandise (operating, Financial , or investing?)

operating

Cash paid for income taxes (operating, Financial , or investing?)

operating

Cash paid to purchase merchandise (operating, Financial , or investing?)

operating

Cash paid in salaries and wages (operating, Financial , or investing?)

operating

Cash paid to purchase property (operating, Financial , or investing?)

investing

Cash received from sale of investments (operating, Financial , or investing?)

investing

gross profit equation

gross profit = total revenue (or net sales) minus the cost of goods sold

Debit (Dr)

These entries increase assets, expenses, and dividends, and decrease liabilities, stockholders’ equity, and revenue.

Credit (Cr

hese entries increase liabilities, stockholders’ equity, and revenue, and decrease assets, expenses, and dividends.

journal

provides a chronological record of all transactions affecting a firm.

journal entry

escribes the format for recording a transaction.

general ledger

provides each account with its individual transactions and resulting account balance.

T-account

It includes the account title at the top, one side for recording debits and one side for recording credits.

trial balance

list of all accounts and their balances at a particular date, showing that total debits equal total credits.

Finanincg acitives inlcude:

Issuing stock, Repurchasing shares, Paying dividends, Borrowing money, Issuing bonds,

Investing Activities include

Purchasing long-term assets, Buying investments, lending money, collecting loan principal

Operating Activities include

cash paid or recieved recipemnts, payments, taxes, expneses

Balance Sheet’s Timing

At a point in time

Income statement’s Timing

Over a period of time

Statement of cash flows’s Timing

Over a period of time

Income Statement

shows a company's profitability over a specific period (like a month, quarter, or year). It acts like a video of the business's financial performance, tracking how much money came in and how much went out.

Net Income Formula

Revenue (Sales) - Expenses = Net Income (Profit or Loss)

Balance Sheet

shows a company's financial position at a single point in time. It reveals what the business owns, what it owes, and what belongs to the owners.

Statement of Cash Flows

tracks the actual cash moving in and out of a company during a specific period. It ignores non-cash accounting adjustments and focuses purely on bank accounts across operating, investing, and financing activities.

Statement of Cash Flows’s Formula

Cash Inflows - Cash Outflows = Net Change in Cash

dividend

reward paid to shareholders for investing in a company's stock. It is a portion of a company's earnings distributed directly to its investors, usually paid out in cash on a regular schedule

Financial accounting information is primarily provided to:

external decision makers.

One disadvantage of the corporate form of business is:

Double taxation.

Name Each Activity

-Investing

-Operating

-Finance

-Operating

Transactions of a company that include the purchase and sale of resources that are expected to benefit the company for several years are referred to as:

Investing activities.

Financing activities def

Transactions the company has with investors and creditors.

The accounts that represent the resources of the company are called:

Assets

Liabilities are best defined as:

Amounts owed to creditors.

Owners’ claims to the company’s resources are referred to as:

stockholders’ equity.

best describes revenue?

An amount recognized when the company sells products or provides services to a customer

The costs of providing goods and services to customers are referred to as:

Expenses

Dividends represent:

Distributions (most often cash) to the owners of the company.

Generally accepted accounting principles (GAAP) are best defined as:

The formal standards that have been established for the purpose of reporting financial accounting information.

Which financial statement provides information at a point in time only?

Balance sheet

Current assets include cash and all other assets expected to become cash or be consumed within one:

Year or one operating cycle, if longer than one year.

Rent collected in advance is a(n):

Liability account in the balance sheet.

Which of the following potentially limits the usefulness of the balance sheet?

-Many valuable resources of the company are not recorded as assets.

-Many items in the balance sheet reflect estimates and judgments of management.

-Property, plant, and equipment are recorded at their book values rather than fair values.

stockholders’ equity formula

Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends

Purchasing office supplies on account will:

Increase assets and increase liabilities.

Receiving cash from an account receivable:

Receiving cash from an account receivable:

Increases one asset and decreases another asset.

What effect does the recording of a revenue have on the accounting equation?

Increase stockholders' equity

Paying salaries to employees for the current period would have what effect on the accounting equation?

Assets decrease and stockholders’ equity decreases.

Revenues normally carry a _____________blank balance and are reported in the _____________.

Credit; Income statement

DEAD

Debit Expenses, Assets, Dividends

COIL

Credit Owner's Equity, Income/Revenue, Liabilities

Expenses normally carry a _____________blank balance and are reported in the _____________blank.

Debit; Income statement

A company received a bill for newspaper advertising services, $400. The bill is due in 10 days. How would the transaction be recorded when the bill is received?

Debit Advertising Expense $400, credit Accounts Payable $400

On July 7, Saints Incorporated received $10,600 in cash from a customer for services to be provided on October 10. Which of the following journal entries would be used to record the transaction on July 7?

Debit Cash $10,600, credit Deferred Revenue $10,600

Deferred Revenue

money a company collects in advance for a product or service it has not yet provided.

Assume that cash is paid for rent to cover the next year. The appropriate debit and credit would be:

Debit Prepaid Rent, credit Cash.