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Each transaction must affect two or more ________ to keep the BAE in balance
Accounts
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what are the three steps in the recording process
HINT: whats happening, Where does it belong, Detailed explantion
- 1. Analyze each transaction
- 2. Enter transaction in a journal
- 3. Transfer journal information to journal accounts
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two types of Deferrals:
- 1. Prepaid Expenses
- 2. Unearned revenues
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what is the purpose of the adjusting entries
to ensure that the reveune recognition principles and the matching priciples are followed
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The balance sheet has three subsections
- 1. Assets
- 2. Liabilities
- 3. Stockholders equity
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in the balance sheet what two sections must equal
Total assets must equal Liability and (+) Equity
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the balance sheet follows which other financial statement
Statement of retained earnings
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retained earnings requires what value from the income statement
Net income
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retained earnings is in what subsection of the balance sheet
Stockholders equity
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net income is derived from
revenues minus expenses
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retained earnings is derived from
net income minus dividends
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adjusting entries use two accounts: one from the _____ ______ and one from the _____ _____
balance sheet, income statement
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the matching principle states that:
Expenses are matched with revenues in the period when the company made efforts to generate those revenues
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the trial balance:
analyzes each account to determine if the account is complete and uptdate
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revenues are recognized in the period which it is earned, describes what principle?
Revenue Recognition Principle
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this principle considers revenues at the time the service was performed
Revenue Recognition Principle
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Expenses are recognized when inccured reather than when paid
Accrual basis accounting
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The required steps in the accounting cycle are:
- (1) analyze business transactions, (2) journalize the transactions, (3) post to ledger
- accounts, (4) prepare a trial balance, (5) journalize and post adjusting
- entries, (6) prepare an adjusted trial balance, (7) prepare financial
- statements, (8) journalize and post closing entries, and (9) prepare a
- post-closing trial balance.
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An accountant mistakenly recorded the
purchase of supplies for cash as a debit to equipment and a credit to accounts
payable. The correcting entry will
require:
a debit to supplies and accounts payable
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The postclosing trial balance will contain which of
the following accounts?
accumulated depreciation
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the postclosing trial balance will contain balances for all except
income summary
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the entry to close dividends would include
a debit to retained earnings and a credit to dividends
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the entry to close utilities expense would include
a debit to income summary and a credit to utilties expense
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Which of the following describes a
liability:
a. economic obligations to creditors
b. future economic benefits
c. accounts receivable
d. paid-in capital
a. economic obligations to creditors
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revenues are
increases in retained earnings resulting from delivering goods or services to customers
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dividends appear on the
retained earnings statement
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a companys financial position at the end of the period may be found by looking on the
balance sheet
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the date of the income statement covers
a period of time
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current assets are assets expected to be converted to cash, sold or comsumed
within the next year or operating cycle, whichever is longer
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increases in stockholders equity arise from
investments by the owner and net income earned during the period
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decrease in stockholders equity result from
a net loss during the period
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which of the following statements should be prepaird be fore the balance shet
statement of retained earnings
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notes receivble due in 60 days would be classified as a
current asset on the balance sheet
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the balance sheet contains
the ending balance in retained earnings
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net income is shown on the
the income statement and statement of retained earnings
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all of the following are assets except: cash, Notes recivble, prepaid xpnses, common stock
common stock
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all of the following are compents of stockholders equity except: revenues, dividends, expenses, accounts payable
accounts payable
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in a period of incerasing prices which inventory flow assumption will result in the lowest amount of income tax expense
LIFO
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two categories of expenses in merchandising companies are
- cost of goods sold
- operating expeneses
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sales revenue less cost of goods sold is called
gross profit
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after gross profit is calculated, operating expeneses are deducted to determine
net income
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which of the following expressions is incorect
a. gross profit - op xpn = NI
b. sales - cogs - op xpn = NI
c. NI + op xpn = gross profit
d. op xpn - cogs = gross profit
op xpn - cogs does not = gross profit
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what is the gross profit % if
Sales 1mil
SR&A 175t
discnt 25 t
COGS 600t
- 1mil- 200t= 800t (NS) -600t = 200t (GP)
- 200t (GP)/800 (NS) =.25 (GPR)
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gross profit - operating expenses =
net income
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