ACC 1-4 EXAM 1

Sole proprietor

1 owner with the same legal entity, liable for everything

Partnership

Multiple owners with equal liability

Corporation

Multiple owners with no liability

3 activities

Operating, investing & financing

2 types of accounting reports

Financial & managerial

Financial reports users

External

Managerial reports users

Internal

What is an asset

Something you own that gives you benifit

What are liabilities

Something you owe

What is equity

Investors contribution / C/S + RE

what is net income

Revenue - expenses

What is dividends

Distributed profits

Are dividends an expense

No

What does the income statement show

Revenue, expenses &net income

What does the statement of retained earnings show

Net income - dividends = RE

income statement timeframe

Period of time

Balance sheet timeframe

Point of time

What does a balance sheet show

A, L, E

What does the statement of cash flow show

Inflows & outflows of all activities

What do notes on statements show

More context & explanations

What is the duality of effects

Every transaction will have 2 effects on the account equation

What are notes payable

Long term liability (more than a year)

What are accounts payable

Short term liabilities (less than a year)

What is the accounting cycle

Analyzing recording & summarising

What is a chart of accounts

A list of every account name & a description to standardize recording

What is debt vs. equity financing

Using a loan or credit vs. stockholders contribution to get assets

What is a transaction

An exchange of benefit

What is analysing

Showing effect on accounting equation

Debit effect on A, L, E

increase in assets & decrease in liability or equity

Credit effect on A, L, E

Decrease in assets & increase in liability and equity

What side does an end balance show on

According to the nature of the account being positive

What is a ledger/T account

A tracker of debit & credit history of each account

What is trial balance

Checking if each account has equal debit and credit total

Revenue definition

What you deserve when you provide a service or product

Expense definition

What you incur from using a benefit

What the max period that an income statement can reflect

A calendar year

When do you use deferred revenue

When you receive cash for a service or product you haven’t provided yet

What kind of account is deferred revenue

Liability

Cash received before service journal entry

Dr cash Cr deferred revenue

Dr deferred revenue Cr service revenue

Cash is received after service is provided journal entry

Dr accounts receivable Cr service revenue

Dr cash Cr accounts receivable

What kind of account is accounts receivable

Asset

What kind of account is sales revenue

Liability

what is an adjusting entry

to show defferred revenue become revenue on an income statement

what will adjusting entry benefit

income statement

What is depreciation

Decrease in asset value after use

Depreciation expense

A liability account tracking the decrease in value in a given time

Accumulated depreciation

Contra asset account tracking total decrease in asset value

How does accumulated depreciation increase & decrease

Increase with credit & decrease with debit

What statement is accumulated depreciation & when does it reset

Balance sheet account never resets