Term
Ch. 1 The primary reason for financial accouting information |
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| What are teh Generally Accepted Accounting Principals? |
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Definition
Promulgated by FASB, not government controlled, credited to Luca |
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Definition
| Financial Accounting Standards Board |
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Ch. 2. What makes owners equity increase? |
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| who uses financial statements? |
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Definition
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| what is the accounting equation? |
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Definition
| Assets= Liabilities + Owners Equity |
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| how does the accounting equation stay in balance? |
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| What is meant by going concern? |
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Definition
- assumption that company in question will stay in business
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| what is retained earnings? |
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Definition
- earnings not paid out to share holders
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| What are the three sections of the statement cash flow? |
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Definition
- operating, investing, financing (OIF)
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| how do you calculate net income? |
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Term
Ch. 3 What does revenue realization mean? |
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| What does a debit and credit mean? |
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Definition
Debit is amount recorded on the left side. Credit is the right side account. (negative) |
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| Which accounts have normal balances of debit and which have normal balances of credit? |
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Definition
Asset accounts have normal balances of debit Liability and O/E have the credit account. |
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Term
| what does double entry mean? |
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Definition
- dual entry accounting
the need for both debit entries and credity entries, equal in dollar amount, to record every transaction. |
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Term
| how does an error affect the trial balance? |
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Definition
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| what is the matching principle? |
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Definition
- expenses match period of revenue generation
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| how to prepare a trial balance. |
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Definition
- debits must equal credits, though not necessarily an indication of accuracy
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Term
Ch. 4 Why do company's prepare adjusting entries? |
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Definition
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| if an adjusting entry is not made what is the affect of the finanical statements? |
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Definition
| income statement is most likely incorrect (other financials as well) |
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| whay type of account is a prepaid expense? |
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| what type of account is accumulated depreciation? |
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Definition
| contra-account, measure of depreciation over time |
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| what is book value and how do you calculate it? |
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Definition
- book value minus accumulated depreciation
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Term
Ch. 5 Whan is the accounting cycle are closing entries prepared? |
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Definition
| end of period (fiscal year) |
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| What is the entry to close an expense? |
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Definition
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| What is the entry to close a revenue? |
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Definition
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| What types of accounts appear on the post closing trial balance? |
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Definition
| real accounts (assets, liabilities, owner’s equity), not nominal accounts |
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| What things must be in the notes to the financial statements? |
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Definition
| a lot of information, generally not numerical but explain numbers in finances |
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| What is a publicly owned company? |
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Definition
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| what is on the statement of retained earnings? |
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Definition
| beginning retained earnings +/ - net income – dividends= ending retained earnings |
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| which financial statement is prepared first? |
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| who requires a company to complete an audit? |
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Definition
| depends: government, state, etc.; auditing required if company is publicly traded |
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| how is return on equity calculated? |
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Definition
| net income divided by average stockholders’ equity (average of beginning and ending stockholders’ equity) |
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| what is the journal entry to declare a dividend? |
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Definition
debit: dividend credit: cash or dividends payable |
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Term
| which accounts are closed? |
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Definition
- revenue, expenses, dividends (RED)
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Term
| how do you calculate the current ratio? |
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Definition
| current assets divided by current liabilities; measure of liquidity |
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