Accounting 101 Formulas Exam
Questions and Answers
Accounting Equation - ANSWER-Assets = liabilities + equity
Current Ratio Equation - ANSWER-current assets/current liabilities
Stockholders equity equation - ANSWER-beginning equity + common stock issued +
net income (or - net loss) - dividends = end equity
Net income equation - ANSWER-revenues - expenses
Inventory Shrinkage (adjusting entry) - ANSWER-merchandise inventory balance before
adjustment - actual merchandise on hand
Net sales revenue - ANSWER-Sales Revenue - discounts
Operating Income - ANSWER-gross profit- operating expenses
Gross Profit % - ANSWER-gross profit/ net sales revenue
Net Purchases - ANSWER-purchases - purchases returns and allowances - purchase
discount
Gross Profit - ANSWER-net sales - cost of goods sold
Cash Ratio - ANSWER-(cash + cash equivalents)/ total current liabilities
Net realizable Value - ANSWER-accounts receivable - allowance for bad debts
Bad Debt: Percent of Sales Method - ANSWER-net credit sales X %
Bad Debt: Percentage of Receivables - ANSWER-Target Balance +/- unadjusted
balance of allowance for bad debts
Target Balance - ANSWER-end balance of accounts receivable X %
Bad Debt: Aging - ANSWER-target Balance +/- unadjusted balance of allowance for bad
debts
Questions and Answers
Accounting Equation - ANSWER-Assets = liabilities + equity
Current Ratio Equation - ANSWER-current assets/current liabilities
Stockholders equity equation - ANSWER-beginning equity + common stock issued +
net income (or - net loss) - dividends = end equity
Net income equation - ANSWER-revenues - expenses
Inventory Shrinkage (adjusting entry) - ANSWER-merchandise inventory balance before
adjustment - actual merchandise on hand
Net sales revenue - ANSWER-Sales Revenue - discounts
Operating Income - ANSWER-gross profit- operating expenses
Gross Profit % - ANSWER-gross profit/ net sales revenue
Net Purchases - ANSWER-purchases - purchases returns and allowances - purchase
discount
Gross Profit - ANSWER-net sales - cost of goods sold
Cash Ratio - ANSWER-(cash + cash equivalents)/ total current liabilities
Net realizable Value - ANSWER-accounts receivable - allowance for bad debts
Bad Debt: Percent of Sales Method - ANSWER-net credit sales X %
Bad Debt: Percentage of Receivables - ANSWER-Target Balance +/- unadjusted
balance of allowance for bad debts
Target Balance - ANSWER-end balance of accounts receivable X %
Bad Debt: Aging - ANSWER-target Balance +/- unadjusted balance of allowance for bad
debts
