Accounting Quiz 1

The general journal

• chronological list of all transactions

• double-entry follows the rule that every transaction affects two accounts

• debits = credits

• a date is recorded for every entry

General ledger/T-accounts

• groups entries into separate accounts

• shows current balances for assets, liabilities, equity, revenue, expenses

• debits are always on the left, credits are always on the right

Trial balance

• generated by the ending balance in T-accounts

• make sure credits = debits

• balances of all ledgers are compiled into debit and credit account column totals that are equal

Assets = Liabilities + Stockholder’s Equity

Equation for Balance Sheets

Revenue - Taxed Expenses = Net Income

Equation for Income Statement

“At XX/XX/XXXX, Current Year”

• Balance Sheet dated

• “at” because think of it like a snapshot done once a year

“For the Month of XXXX, Current Year”

• Income Statement Dated

• Income statements are done multiple times during the year so you won’t get a specific date

Pretax income = Total revenue - Total expenses (excluding tax)

Pretax income equation

Net income = Pretax income - Income tax expense

Net income equation

• ASSETS

• Current Assets

• Noncurrent Assets

• Total Assets

• LIABILITIES

• Current Liabilities

• Noncurrent Liabilities

• Total liabilities

• STOCKHOLDER’S EQUITY

• Stockholder’s Equity

• Total Stockholder’s Equity

• Total Liabilities and Stockholder’s Equity

format of balance sheets

Retained Earnings = Net Income - Dividends

Retained earnings equation

Current Ratio = Current Assets / Current Liabilities

Current Ratio equation

Current ratio

• the higher this is, the more able a company is to satisfy short-term obligations with current assets