ACCT201 Test 1 Review

What is the Accounting Equation?

Assets=Liabilities+Equity

What is an asset?

Resources owned by a company

What are liabilities?

Amounts a company owes to others

What is Stockholders' Equity?

The owners' claims to resources

What are Dividends?

Distributions to stockholders or company giving shareholders a return on their investment

What are Revenues?

Sales of products or services

What are Expenses?

Costs related to a company's sale or products or services

What type of account (Asset, Liability or Equity) is Cash?

Asset

What type of account (Asset, Liability or Equity) is Supplies?

Asset

What type of account (Asset, Liability or Equity) is Equipment?

Asset

What type of account (Asset, Liability or Equity) is Land?

Asset

What type of account (Asset, Liability or Equity) is Accounts Payable?

Liability

What type of account (Asset, Liability or Equity) is Notes Payable?

Liability

What type of account (Asset, Liability or Equity) is Common Stock?

Equity

What type of account (Asset, Liability or Equity) is Retained Earnings?

Equity

What is retained earnings?

the accumulation of profits/losses of a company over the entire course of their business (both current and prior periods)

What is Accounts Payable?

(liability) Amounts a company owes to suppliers/vendors

What are Accounts Receivable?

Cash amounts that are owed to a company by customers for sales or services already provided but have not yet been paid for

What are the four financial statements that we have discussed in class?

1. Income statement

2. Statement of Retained Earnings

3. Balance Sheet

4. Statement of Cash Flows

What are the four financial statements, in order of preparation?

1. Income Statement

2. Statement of Retained Earnings

3. Balance Sheet

4. Statement of Cash Flows

What is the normal balance of an Asset account?

Debit

What is the normal balance of a Liability account?

Credit

What is the normal balance of an Equity account?

Credit

Do Assets increase with a debit or credit?

debit

Do Liabilities increase with a debit or credit?

credit

Do Assets Decrease with a debit or credit?

Credit

Do Liabilities Decrease with a debit or credit?

debit

Does a Revenue account increase with a debit or credit?

Credit

Do Dividends increase with a debit or credit?

Debit

Do Expense accounts increase with a debit or credit?

Debit

What is a T-account used for?

to accumulate inflows/outflows of an account

What do Journal Entries do?

Records transactions that take place with the accounts and its amounts that are associated with that transaction

What is a trial balance?

It is a snapshot of a company's account balances at a point in time

What does a Income statement show?

shows us the revenues minus our expenses resulting in the net income for a period

what is on a balance sheet?

-Assets, Liabilities and Equity

-shows us the accounting equation

what must always be true about the balance in total assets in relation to total liability and total equity?

total assets must be equal to total liabilities + total equity because it represents the accounting equation

what does DEALER Stand for?

(Increases with a Debit)

-Dividends

-Expenses

-Assets

(increases with a credit)

-Liabilities

-Equity

-Revenue

How do you calculate the ending balance of an account with a normal debit balance (increases with a debit)?

Total Debits - Total Credits

How do you calculate the ending balance of an account with a normal Credit balance (increases with a Credit)?

Total Credits - Total Debits

What is the formula for Net income (what we calculate on our Income Statement)?

Revenues - Expenses = Net Income

What is the formula for Ending Retained Earnings (what we calculate on our Statement of Retained Earnings)?

Beginning Retained Earnings + Net Income - Dividends paid = Ending Retained Earnings

What is an adjusting entry?

An entry made at the end of the accounting period that is used to record revenues to the period in which they are earned and expenses to the period in which they occur.

What is accrual accounting?

Recording revenues when we earn them and expenses in the period the benefit is received

What is depreciation?

The decline in value of an asset

(or an allocation of a cost of a fixed asset over the course of its useful life (or how long we expect it to be useful/beneficial))

What type of account is accumulated depreciation?

contra-asset

What is the journal entry to record depreciation?

debit depreciation expense

credit: accumulated depreciation

What is the journal entry to record cash paid for equipment?

Debit: Equipment (increases our equipment account)

Credit: Cash (decreases our cash account for amount paid)

What is the journal entry to record cash paid to us for services completed?

Debit: Cash

Credit: Service Revenue

What is the journal entry to record services provided to customer on credit terms (we have not received the cash yet)?

Debit: Accounts Receivable

Credit: Service Revenue

What is the journal entry to record us receiving a check for services previously rendered on account?

Debit: Cash

Credit: Accounts Receivable

What is the journal entry to record us purchasing equipment on account?

Debit: Equipment

Credit: Accounts Payable

What is the journal entry to record us completeing work related to cash received in advance of services being performed?

Debit: Unearned Revenue

Credit: Service Revenue

What is the journal entry to record the amount of prepaid rent that has expired?

Debit: Rent Expense

Credit: Prepaid Rent

What is the journal entry to record us incurring wages expenses that will not be paid by the end of the period?

Debit: Wages expense

Credit: Wages Payable

What is the journal entry to adjust the amount of supplies we have on hand at the end of the period?

Debit: Supplies Expense

Credit: Supplies