MLTP CHOICE

current asset ex)

cash, petty cash, a/r, inventory, prepaid rent, trading investments

non current asset ex)

ppe (land, equipement, building, furniture), investments (longterm bonds), intangible assets (patents, copyrights, goodwill)

current liabilities ex)

a/r, shareholders equity, salaries payable, unearned revenue

non current liabilities ex)

mortgage, longterm debt

Equity ex)

common shares, preferred shares, retained earnings (last)

net income (or net loss) =

income - expenses

closing entries

close out all revenue accounts to retained earnings (dr revenues, cr retained earnings), close out expense accounts on retained earnings (dr retained earnings, cr expenses), close out dividends declared to retained earnings ( dr retained earnings, cr dividends declaired)

revenue is earned when

risk and rewards are transferred to customer, revenue amount is measurable, customer has been invoiced and company is sure of collection

FOB Shipping Point

Once shipped, buyer takes responsibility, seller gets money right away

FOB Destination

Risk and rewards during transit is suppliers problem, seller gets money when delivered

accrued revenue

company has earned revenue before cash is received (dr, accounts receivable, cr revenue)

accrued expenses

company has incurred the expense before making the payments (dr expense, cr payable)

prepaid expenses

company has paid for expenses before incurring the expense (dr prepaid expenses, cr cash)

unearned / deferred revenues

company has received cash before revenue is earned (dr cash, cr unearned revenue)

BANK RECONCILIATION JOURNAL ENTRIES: EFT

dr cash, cr a/r

BANK RECONCILIATION JOURNAL ENTRIES: Bank fees

dr bank service fees, cr cash

BANK RECONCILIATION JOURNAL ENTRIES: NSF

dr a/r, cr cash

BANK RECONCILIATION JOURNAL ENTRIES: errors

dr a/p, cr cash