STUDY GUIDE FOR FINAL EXAM Study the accounting concepts: matching, cost, revenue recognition, consistency, business entity Three types of businesses: Three types of business organizations---advantages and disadvantages of each type of organization; Rules of debits and credits; classification of accounts; what an account is; what a journal is; what a ledger is; what a chart of account is; Normal balances of each type of account; increase and decrease side of each type of account Accrual basis
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unexpired cost, is an asset recorded on the balance sheet - Cost of assets that have been consumed during the current period are recorded in income statement as expenses – expired costs, deducted from income (revenues) to determine profit. Temporary (nominal) and permanent (real) accounts: - Separate accounts made for each major type of income and expense - To facilitate preparation of next period income statement, all income/expenses are reduced to a zero balance at
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(short-term) or noncurrent (long-term). Companies expect to collect current receivables within a year or during the current operating cycle, whichever is longer. They classify all other receivables as noncurrent. Receivables are further classified in the balance sheet as either trade or nontrade receivables. Customers often owe a company amounts for goods bought or services rendered. A company may subclassify these trade receivables , usually the most significant item it possesses, into accounts receivable
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develops a long-lived asset, or operates a long-lived asset under normal conditions. However, it does not occur solely from an entity’s plan to dispose of a long-lived asset. Environmental obligations are environmental remediation liabilities that relate to pollution arising from a prior act, generally as a result of the provisions of laws and regulations. In ASC 410-20, the subtopic is asset retirement obligations. Recognition of a liability for an asset retirement obligation shall occur in the
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.............. 3 Cash versus Accrual Accounting................................................................................7 Qualitative Characteristics of Accounting Information ...........................................9 Valuations on the Balance Sheet ................................................................................11 Effects of Transactions on Financial Statements ......................................................13 Activity #1 ........................................
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1. Recognition of normal balances a. Amounts paid to a mall for rent -expense b. Amounts to be paid in 10 days- liability c. A new fax machine purchases for office use- assets d. Land held as an investment - assets e. Amounts due from customers -assets f. Daily sales of merchandise sold - revenue g. Promotional costs to publicize a concert - expense h. A long-term loan owed to Citizens Bank -liability i. The albums, tapes, and CDs held for sale to customers –assets Normal balance for:
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processes a significant number of routine intercompany transactions. Individual intercompany transactions are not material and primarily relate to balance sheet activity--- for example, cash transfers between business units to finance normal operations. A formal management policy requires monthly reconciliation of intercompany accounts and confirmation of balances between business units. However there is not a process in place to ensure performance of these procedures. As a result detailed reconciliation
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liability, equity, revenue, and expense 5. Know what items appear under each classification in the balance sheet 6. Know how to compute Earnings per Share 7. Know the composition of a Retained Earnings statement 8. Know about a ledger account, its different parts, the rules of debit and credit, and the meaning of the term normal balance of an account 9. Know about revenue recognition principle, matching principle, and time-period assumption 10. Know the computation net income under
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liability, equity, revenue, and expense 5. Know what items appear under each classification in the balance sheet 6. Know how to compute Earnings per Share 7. Know the composition of a Retained Earnings statement 8. Know about a ledger account, its different parts, the rules of debit and credit, and the meaning of the term normal balance of an account 9. Know about revenue recognition principle, matching principle, and time-period assumption 10. Know the computation net income under
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CHAPTER 18 REVENUE RECOGNITION MULTIPLE CHOICE—Conceptual AnswerNo.Description c1.Revenue recognition principle. b2.Definition of "realized." a3.Definition of "earned." d4.Recognizing revenue at point of sale. d5.Recording sales when right of return exists. c6.Revenue recognition when right of return exists. d7.Revenue recognition when right of return exists. b8.Appropriate accounting method for long-term contracts. c9.Percentage-of-completion method
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