©BRAINBARTER EXAM SOLUTIONS 2024/2025
ALL RIGHTS RESERVED.
Acct1021 Midterm #1 Study Guide.
Retained earnings - answer✔accumulation of all past revenues and expenses - income
distributed to shareholders as dividends. If net income is positive, retained earnings increases.
Financial Leverage ration - answer✔1 when investors own the whole company.
Debt/shareholder equity
Principles of revenue recognition - answer✔requires that companies recognize revenue in the
accounting period in which the performance obligation is satisfied. 1) persuasive evidence of
arrangement. 2) sales price is fixed or determinable. 3) delivery has occurred or services have
been rendered. 4) collection of receivable is reasonably assumed.
unearned revenue - answer✔account on liability sheet for when cash from customer has been
received, but company has not yet delivered good or service. Debit cash and credit unearned
revenue. When recognized, debit revenue and credit unearned revenue.
Prepaid expense - answer✔asset account on balance sheet for when cash has been paid for an
expense, but the expense has not been used or incurred (ie prepaying rent, water bill, etc but
not yet using water or moving to building. Usually go by month
cost of goods sold - answer✔expense account. not calculated until goods have been sold.
1|Page
, ©BRAINBARTER EXAM SOLUTIONS 2024/2025
ALL RIGHTS RESERVED.
statement of cash flows - answer✔only changes when cash is affected. Cash flow from
operations, investing, financing. Not affected by COGS.
Operating activities - answer✔Cash flow activities that include the cash effects of transactions
that create revenues and expenses and thus enter into the determination of net income.
Investing activities - answer✔earnings or expenditures on long term assets, ie equipment and
facilities. Buying and selling non-current assets and investments. includes lending for
investment purposes.
financing activities - answer✔cash flows between company and its owners and creditors. Ie:
issuing bonds, retiring bonds, selling stock, buying back stock.
expenses - answer✔have debit balances. affect SE
revenues - answer✔have credit balances. Affect SE
journal entry for issuing stock - answer✔Debit cash, credit common stock and additional paid in
capital.
common stock - answer✔shares issued x par value
additional paid in capital - answer✔the excess of amounts paid in over the par or stated value
calculating stockholders equity - answer✔any transactions affecting stockholders equity,
including the revenues and expenses.
2|Page
ALL RIGHTS RESERVED.
Acct1021 Midterm #1 Study Guide.
Retained earnings - answer✔accumulation of all past revenues and expenses - income
distributed to shareholders as dividends. If net income is positive, retained earnings increases.
Financial Leverage ration - answer✔1 when investors own the whole company.
Debt/shareholder equity
Principles of revenue recognition - answer✔requires that companies recognize revenue in the
accounting period in which the performance obligation is satisfied. 1) persuasive evidence of
arrangement. 2) sales price is fixed or determinable. 3) delivery has occurred or services have
been rendered. 4) collection of receivable is reasonably assumed.
unearned revenue - answer✔account on liability sheet for when cash from customer has been
received, but company has not yet delivered good or service. Debit cash and credit unearned
revenue. When recognized, debit revenue and credit unearned revenue.
Prepaid expense - answer✔asset account on balance sheet for when cash has been paid for an
expense, but the expense has not been used or incurred (ie prepaying rent, water bill, etc but
not yet using water or moving to building. Usually go by month
cost of goods sold - answer✔expense account. not calculated until goods have been sold.
1|Page
, ©BRAINBARTER EXAM SOLUTIONS 2024/2025
ALL RIGHTS RESERVED.
statement of cash flows - answer✔only changes when cash is affected. Cash flow from
operations, investing, financing. Not affected by COGS.
Operating activities - answer✔Cash flow activities that include the cash effects of transactions
that create revenues and expenses and thus enter into the determination of net income.
Investing activities - answer✔earnings or expenditures on long term assets, ie equipment and
facilities. Buying and selling non-current assets and investments. includes lending for
investment purposes.
financing activities - answer✔cash flows between company and its owners and creditors. Ie:
issuing bonds, retiring bonds, selling stock, buying back stock.
expenses - answer✔have debit balances. affect SE
revenues - answer✔have credit balances. Affect SE
journal entry for issuing stock - answer✔Debit cash, credit common stock and additional paid in
capital.
common stock - answer✔shares issued x par value
additional paid in capital - answer✔the excess of amounts paid in over the par or stated value
calculating stockholders equity - answer✔any transactions affecting stockholders equity,
including the revenues and expenses.
2|Page
