Accounting 2001 Final Exam Review Peters

Income Statement

Reports revenues, expenses, and net income for a period.

Retained Earnings Statement

Beg RE + Net Income – Dividends = End RE.

Balance Sheet

Reports assets, liabilities, and stockholders’ equity at a point in time.

Statement of Cash Flows

Shows cash from operating, investing, and financing activities.

Current Assets

Cash, A/R, supplies, inventory, prepaid items; used within one year.

Long-Term Assets

PP&E, long-term investments, intangible assets.

Current Liabilities

Debts due within one year (A/P, salaries payable, unearned revenue).

Long-Term Liabilities

Notes payable, bonds payable due in more than one year.

Stockholders’ Equity

Common stock + retained earnings.

Debit Increases

Assets, expenses, dividends.

Credit Increases

Liabilities, equity, revenues.

Journal Entry

A record of a transaction showing a debit and a credit.

Pay Cash

Cash decreases; credit cash.

Receive Cash

Cash increases; debit cash.

Deferral

Cash first, revenue/expense later (prepaid, supplies, unearned revenue).

Accrual

Revenue/expense first, cash later (accrued revenue/expenses).

Supplies Adjustment

Supplies Expense increases; Supplies decreases.

Unearned Revenue Adjustment

Unearned Revenue decreases; Service Revenue increases.

Accrued Salaries

Salaries Expense increases; Salaries Payable increases.

Adjusted Trial Balance

Trial balance after adjusting entries; used to prepare financial statements.

Perpetual Inventory System

Constantly updates inventory and COGS.

Sales Entry (Perpetual)

Dr Cash/A/R, Cr Sales Revenue; Dr COGS, Cr Inventory.

Gross Profit

Net Sales – COGS.

Multi-Step Income Statement

Net Sales → Gross Profit → Operating Income → Net Income.

Common Stock Issuance

Dr Cash; Cr Common Stock (par × shares); Cr APIC.

Preferred Stock

Stock with priority for dividends.

Treasury Stock Purchase

Dr Treasury Stock; Cr Cash.

Cash Dividends – Declaration

Dr Dividends; Cr Dividends Payable.

Cash Dividends – Payment

Dr Dividends Payable; Cr Cash.

Stock Split

No journal entry; increases shares and decreases par value.