accounting 2000 exam 1

a t account consist of 3 parts

an account title

a debit side

a credit side

a credit on the RIGHT side

a DEBIT on the left side

Going-Concern Assumption

The business is presumed to

continue operating instead of being

closed or sold

Time Period Assumption

The life of a company

can be divided into time periods,

such as months and years.

Monetary Unit Assumption

Transactions and events are

expressed in monetary, or

money, units

Business Entity Assumption

A business is accounted for

separately from other business

entities, including its owner.

assets (resources a company owns or controls. These resources are expected to yield future benefits.)

CASH,

SUPPLIES,

INVENTORY

EQUIPMENT,

LAND

ACCOUNTS RECEIVABLE

liabilities (Creditors’ claims on assets; are debts and

obligations to provide products or services to

others.)

WAGES PAYABLE,

ACCOUNTS PAYABLE,

NOTES PAYABLE,

TAXES PAYABLE

Equity

The owner’s claim on assets.

OWNER’S INVESTMENT,

COMMON STOCK,

DIVIDENDS,

RETAINED EARNINGS

Accounts Payable = you owe someone because you bought something on credit.

Notes Payable = you owe someone because you borrowed money and signed a formal agreement.

• Owner's Investment → usually used for a sole proprietorship

• 
  

• Common Stock → used for a corporation

all revenue and expenses go on the

income statement

dividends

distribution of earnings

: Money or other assets that a company distributes to its owners/shareholders from its profits.

📌 Easy way to remember:
Dividends = money paid to owners

liabilties always end in the word payable

Listed in order of liquidity- how quick it can be converted into cash 

LIABILITIES  are claims by creditors against assets 

Your net income flows into your statement of retained earnings,

your retained earnings goes into your balance sheet 

ASSETS = HAVE

LIABILITIES = OWE

EQUITY = OWNERS 

DOUBLE ENTRY ACCOUNTING SYSTEM-

That records the effect of each transaction in at least two accounts, with at least one debit and one credit.

Prepaid accounts (also called prepaid expenses) are:

Assets from prepayments of future expenses. 

A company’s ledger (or general ledger) is:

A collection of all accounts and their balances used by the company. 

A company’s written promissory note to pay a future amount is a(n):

Note payable. 

Which account normally has a credit balance -

wages payable 

Which is not an asset account-

services revenue

which is not a source document

ledgers

The account that is classified as an asset in a companies chart of accounts is -

accounts receivable 

 the account below that is classified as a liability in a company’s chart of accounts:

unearned revenue

The account that is classified as a liability account-

accounts payable

Source documents identify and describe transactions and events entering the accounting system. 

true

Unearned revenues are:

Liabilities recorded when customers pay in advance for products or services.

Items such as sales receipts, checks, purchase orders, bills from suppliers, payroll records, and bank statements are examples of source documents.

-true 

Accounts receivable are held by a seller and are promises of payment from customers to sellers.-

true 

All Elephants Dance on the Living Room Carpet Rug

All Elephants Dance: Increases Debits, Decreases Credits

A- Assets

E- Expenses

D- Dividends

all assets increase with a

debit (debit an account to increase it)

All liabilties have a

credit balance (you increase it with a credit)

Dividends AND expenses

imcrease with a debit

revenues and stock

increase with a credit