1. Each transaction must affect two or more ________ to keep the BAE in balance
  2. 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
  3. two types of Deferrals:
    • 1. Prepaid Expenses
    • 2. Unearned revenues
  4. what is the purpose of the adjusting entries
    to ensure that the reveune recognition principles and the matching priciples are followed
  5. The balance sheet has three subsections
    • 1. Assets
    • 2. Liabilities
    • 3. Stockholders equity
  6. in the balance sheet what two sections must equal
    Total assets must equal Liability and (+) Equity
  7. the balance sheet follows which other financial statement
    Statement of retained earnings
  8. retained earnings requires what value from the income statement
    Net income
  9. retained earnings is in what subsection of the balance sheet
    Stockholders equity
  10. net income is derived from
    revenues minus expenses
  11. retained earnings is derived from
    net income minus dividends
  12. adjusting entries use two accounts: one from the _____ ______ and one from the _____ _____
    balance sheet, income statement
  13. the matching principle states that:
    Expenses are matched with revenues in the period when the company made efforts to generate those revenues
  14. the trial balance:
    analyzes each account to determine if the account is complete and uptdate
  15. revenues are recognized in the period which it is earned, describes what principle?
    Revenue Recognition Principle
  16. this principle considers revenues at the time the service was performed
    Revenue Recognition Principle
  17. Expenses are recognized when inccured reather than when paid
    Accrual basis accounting
  18. 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.
  19. 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
    a debit to supplies and accounts payable
  20. The postclosing trial balance will contain which of
    the following accounts?
    accumulated depreciation
  21. the postclosing trial balance will contain balances for all except
    income summary
  22. the entry to close dividends would include
    a debit to retained earnings and a credit to dividends
  23. the entry to close utilities expense would include
    a debit to income summary and a credit to utilties expense
  24. Which of the following describes a

    a. economic obligations to creditors

    b. future economic benefits

    c. accounts receivable

    d. paid-in capital
    a. economic obligations to creditors
  25. revenues are
    increases in retained earnings resulting from delivering goods or services to customers
  26. dividends appear on the
    retained earnings statement
  27. a companys financial position at the end of the period may be found by looking on the
    balance sheet
  28. the date of the income statement covers
    a period of time
  29. current assets are assets expected to be converted to cash, sold or comsumed
    within the next year or operating cycle, whichever is longer
  30. increases in stockholders equity arise from
    investments by the owner and net income earned during the period
  31. decrease in stockholders equity result from
    a net loss during the period
  32. which of the following statements should be prepaird be fore the balance shet
    statement of retained earnings
  33. notes receivble due in 60 days would be classified as a
    current asset on the balance sheet
  34. the balance sheet contains
    the ending balance in retained earnings
  35. net income is shown on the
    the income statement and statement of retained earnings
  36. all of the following are assets except: cash, Notes recivble, prepaid xpnses, common stock
    common stock
  37. all of the following are compents of stockholders equity except: revenues, dividends, expenses, accounts payable
    accounts payable
  38. in a period of incerasing prices which inventory flow assumption will result in the lowest amount of income tax expense
  39. two categories of expenses in merchandising companies are
    • cost of goods sold
    • operating expeneses
  40. sales revenue less cost of goods sold is called
    gross profit
  41. after gross profit is calculated, operating expeneses are deducted to determine
    net income
  42. 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
  43. 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)
  44. gross profit - operating expenses =
    net income
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