ACCT 2401 Schisler Final Exam Review | Accounting Study Guide, Key Concepts & Practice
Questions
Accounting rules are called - ANS ✔✔Generally Accepted Accounting Principles
Per the Cost principle, how should assets be recorded on the balance sheet? - ANS ✔✔When a
business acquires assets or services, they should be recorded at their actual (historical) cost.
What is accrual accounting - ANS ✔✔Recognize a transaction when it occurs, which may or may
not be when cash is received or paid
What is the accounting equation? - ANS ✔✔Assets = Liabilities + Stockholders' Equity
Assets - ANS ✔✔An economic resource that a business owns and can use to operate the
business; things of value
Liabilities - ANS ✔✔Represent the creditors' interest in the business, future obligations of a
business, business owes somebody something
Stockholders' Equity - ANS ✔✔Represents the owners interest in the business
Made up of Paid-In Capital (owner's investments) plus Retained Earnings (profits kept in the
business)
What causes stockholders equity to increase: - ANS ✔✔issuance of common stock and revenue
What cause stockholders equity to decrease: - ANS ✔✔expenses and dividends
, Revenue - ANS ✔✔Money (or other assets) that a business receives from the sale of a product
or service.
Expenses - ANS ✔✔Money (or other assets that a business surrenders in the course of
operating a business) . The company incurs a cost that has been used up in the process of selling
a product or service; the cost has no future value.
Net Income (increases equity) - ANS ✔✔revenue > expenses
Net Loss (decreases equity) - ANS ✔✔expenses > revenue
Dividends - ANS ✔✔Payment of profits (past/present) to stockholders usually in the form of
cash. Not an expense to a business, rather stockholders equity. Do not reduce net income for
the year but DO reduce retained earnings (profit). Used in the Statement of Retained Earnings.
Purpose of Income Statement - ANS ✔✔Reports the results of operations; the revenue and the
expense along with the net income or loss of a business over a period of time (one month, one
quarter, one year)
What account types are found on the income statement? - ANS ✔✔Revenue (by type of
revenue)
Minus: Expenses (by type of expense)
Equals: Net Income (or Loss)
What is the 3 line heading of an income statement? - ANS ✔✔Name of Company
Income Statement
Month Ended March 31, 2018 or Year Ended December 31, 2018
Questions
Accounting rules are called - ANS ✔✔Generally Accepted Accounting Principles
Per the Cost principle, how should assets be recorded on the balance sheet? - ANS ✔✔When a
business acquires assets or services, they should be recorded at their actual (historical) cost.
What is accrual accounting - ANS ✔✔Recognize a transaction when it occurs, which may or may
not be when cash is received or paid
What is the accounting equation? - ANS ✔✔Assets = Liabilities + Stockholders' Equity
Assets - ANS ✔✔An economic resource that a business owns and can use to operate the
business; things of value
Liabilities - ANS ✔✔Represent the creditors' interest in the business, future obligations of a
business, business owes somebody something
Stockholders' Equity - ANS ✔✔Represents the owners interest in the business
Made up of Paid-In Capital (owner's investments) plus Retained Earnings (profits kept in the
business)
What causes stockholders equity to increase: - ANS ✔✔issuance of common stock and revenue
What cause stockholders equity to decrease: - ANS ✔✔expenses and dividends
, Revenue - ANS ✔✔Money (or other assets) that a business receives from the sale of a product
or service.
Expenses - ANS ✔✔Money (or other assets that a business surrenders in the course of
operating a business) . The company incurs a cost that has been used up in the process of selling
a product or service; the cost has no future value.
Net Income (increases equity) - ANS ✔✔revenue > expenses
Net Loss (decreases equity) - ANS ✔✔expenses > revenue
Dividends - ANS ✔✔Payment of profits (past/present) to stockholders usually in the form of
cash. Not an expense to a business, rather stockholders equity. Do not reduce net income for
the year but DO reduce retained earnings (profit). Used in the Statement of Retained Earnings.
Purpose of Income Statement - ANS ✔✔Reports the results of operations; the revenue and the
expense along with the net income or loss of a business over a period of time (one month, one
quarter, one year)
What account types are found on the income statement? - ANS ✔✔Revenue (by type of
revenue)
Minus: Expenses (by type of expense)
Equals: Net Income (or Loss)
What is the 3 line heading of an income statement? - ANS ✔✔Name of Company
Income Statement
Month Ended March 31, 2018 or Year Ended December 31, 2018
