What is the Retained Earnings Formula?

Beginning RE+net income-dividends

What is Relevance? (Qualitative Characteristic)

The capacity of information to make a difference in a decision

What is depreciation?

Allocating the original cost of an asset to expense over time

What is an example of a gain or a loss?

You lose a lawsuit against your company and have to pay $50,000

What does DEAD stand for?

Debits for expenses, assets, and dividends

What is the goal of closing entries?

To close temporary accounts and move balance to a permanent account

In which order do you prepare the financial statments?

Income statement, statment of SHE, balance sheet, statement of cash flows

Which adjusting entries have original entries attached with them?

Deferred revenue, Deferred expense

How are you feeling about the test?

I'm for sure making an A, I'm nervous but understand a good chunk of the concepts, I've been practicing and am feeling mostly prepared!, I literally have no idea what's going on

What is the current ratio used for?

to analyze a company's ability to pay its debt as they come due

List these assests in order of liquidity

Cash, A/R, prepaid expenses, equipment

What is the role of GAAP?

To create standard accounting rules and assumptions for finanical statement

Closing entries: if there is a loss in income summary, what does step 3 look like?

Credit to income summary and debit to Retained Earnings

When is revenue recognized under GAAP?

When the performance obligation is satisfied

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ACCT 2301 Review

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Questions 25

Answers

1
What is an example of an accrued expense?
Utilities
Advertising
Insurance
Magazine subscriptions
2
How many journal entries does the perpetual inventory method have?
3
2
1
none, you don't record it in journal entries
3
What is the Retained Earnings Formula?
Net income-Beginning RE+dividends
Beginning RE+gross profit-common stock
Common stock-Beginning RE+common stock
Beginning RE+net income-dividends
4
What is Relevance? (Qualitative Characteristic)
Comparisons can be made between companies
The capacity of information to make a difference in a decision
Information is disclosed to outsiders in a timely manner
Users can depend on the information: complete, accurate, and unbiased
5
What is an example of a long-term liability?
Unearned Revenue
Accounts Payable
Bonds Payable
Interest Payable
6
What is depreciation?
Decreasing the value of an asset to represent market vaue
Allocating the original cost of an asset to expense over time
Adjusting the cost of an asset to line up with the current selling price
7
What is an example of a gain or a loss?
You buy $500 worth of painting supplies to sell at home depot
You lose a lawsuit against your company and have to pay $50,000
You sell 15 tshirts for $20 in your retail shop
You pay the janitors $2000 to clean your offices
8
What does DEAD stand for?
Debits for expenditure, assets, and debts
Debits for expenses, assets, and dividends
Debits for Earnings, APIC, and debts
Decrease of earnings, APIC, and debts
9
Cash will always be a part of an adjusting entry
False
True
10
What is the goal of closing entries?
To close temporary accounts and move balance to a permanent account
To find income summary and move that amount to net income account
To figure out how much we paid in dividends
To make sure that the accounting equations equals out
11
In which order do you prepare the financial statments?
Income statement, statment of SHE, balance sheet, statement of cash flows
Statement of cashflows, income statement, statement of SHE, balance sheet
Balance sheet, income statment, statement of SHE, statement of cash flows
Statement of SHE, Balance sheet, statment of cash flows, income statment
12
Which adjusting entries have original entries attached with them?
Deferred revenue
Deferred expense
Accrued revenue
Accrued expense
13
What is the effect if you don't do an adjusting entry after using up prepaid insurance?
Liability balance is overstated
Net income is overstated
Net income is understated
Asset balance is understated
14
How are you feeling about the test?
I'm for sure making an A
I'm nervous but understand a good chunk of the concepts
I've been practicing and am feeling mostly prepared!
I literally have no idea what's going on
15
What agency enforces the accounting rules?
GAAP
FASB
SEC
IASB
16
Which account have a normal credit balance?
A/R
Accumulated Depreciation
Dividends
Expenses
17
What is the current ratio used for?
to analyze a company's ability to pay its debt as they come due
To measure a company's ability to meet it's long-term financial commitments
To find what % of revenue is left over after covering COGS
To decide if a company makes enough revenue to cover their expenses
18
List these assests in order of liquidity
Cash, trademark, A/R, land
Cash, A/R, prepaid expenses, equipment
A/R, cash, inventory, land
A/R, supplies, cash, furniture
19
Sales revenue for the year is $50,000 for 500 items sold. COGS totals $30,000. What is the gross profit per item sold?
$20
$40
$100
$60
20
What is included in finding gross profit?
Net income, COGS, and operating income
Net sales and COGS
Net sales, COGS, and operating income
Net income and COGS
21
What is the role of GAAP?
To improve the accuracy of the 4 financial statements and their accounts
To create standard accounting rules and assumptions for finanical statement
to establish and improve the international accounting rules
To enforce and maintain current accounting rules
22
Closing entries: if there is a loss in income summary, what does step 3 look like?
Debit to income summary and credit to Retained Earnings
Debit to income summary and credit to expenses
Credit to income summary and debit to Retained Earnings
Debit to Revenue and credit to income summary
23
When is revenue recognized under GAAP?
When cash is exchanged
When the customer pays on account
When the payment invoice comes through
When the performance obligation is satisfied
24
What assumption says that only transactions that can be expressed in terms of money can be included in the acct records?
Economic Entity Assumption
Time Period Assumption
Monetary Unit Assumption
Going Concern Assumption
25
What is not one of the 3 business activities of a company?
Investing Activities
Operating Activities
Capitalizing Activities
Financing Activities

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