Financial Accounting 2401 Final Exam Study Guide | ACCT 2401 Review, Key Concepts &
Practice Questions
Asset(s) - ✔✔An economic resource that a business owns and can use to operate the business.
Examples: Cash, Inventory, Buildings, Accounts Receivable, Supplies, Equipment, Notes
Receivable, Prepaid Expenses, land.
Liabilities - ✔✔An amount owed to a lender or other creditor
Examples: Accounts Payable, Notes Payable, Accrued Liabilities
Owner's Equity/Stockholder's Equity - ✔✔Money Provided to the business by owners either
through an initial investment or the retention of profits.
Examples:Common Stock, Retained Earnings, Revenue, Expense, Dividend.
Common Stock +Revenue - Expenses - Dividends
Debit - ✔✔the LEFT side of any account; an entry made to the LEFT side of the account.
Examples: Assets, Dividends, Expenses
Credit - ✔✔the RIGHT side of any account; an entry made to the RIGHT side of the account.
Examples: Liabilities, Common Stock, Retained Earnings, Revenues.
, Normal Balances of accounts- types of accounts - ✔✔The balance that appears on the side of
an account where increases are recorded; the expected balance of an account.
Examples:
Assets + on the DEBIT side, so the normal balance of an asset is on the DEBIT side.
Liabilities + on the CREDIT side, so the normal balance of a liability is on the CREDIT side.
Accrual Accounting - ✔✔Records revenues when earned and expenses when incurred without
regard to when cash is exchanged.
Matching Principal - ✔✔Recording expenses in the time period they were incurred to produce
revenues, thus matching them against the revenues earned during that same period.
Temporary Account(s) - ✔✔The revenue, expense, and dividend accounts; these accounts are
closed at the end of the accounting period.
Permanent Account(s) - ✔✔The asset, liability, and stockholder's equity/ owner's equity
accounts; these accounts are not closed at the end of the accounting period.
Periodic Inventory - ✔✔An inventory system in which the business does not keep a continuous
record of inventory on hand. at the end of the accounting period, a physical count of inventory
is taken and is used to determine the cost of ending inventory and the cost of goods sold.
Perpetual Inventory - ✔✔An inventory system in which the business keeps a continuous record
of inventory on hand and the cost of the goods sold.
Gross Profit - ✔✔Net sales revenue minus the cost of goods sold; also called gross margin.
Sales - Cost of Goods Sold (COGS)
Practice Questions
Asset(s) - ✔✔An economic resource that a business owns and can use to operate the business.
Examples: Cash, Inventory, Buildings, Accounts Receivable, Supplies, Equipment, Notes
Receivable, Prepaid Expenses, land.
Liabilities - ✔✔An amount owed to a lender or other creditor
Examples: Accounts Payable, Notes Payable, Accrued Liabilities
Owner's Equity/Stockholder's Equity - ✔✔Money Provided to the business by owners either
through an initial investment or the retention of profits.
Examples:Common Stock, Retained Earnings, Revenue, Expense, Dividend.
Common Stock +Revenue - Expenses - Dividends
Debit - ✔✔the LEFT side of any account; an entry made to the LEFT side of the account.
Examples: Assets, Dividends, Expenses
Credit - ✔✔the RIGHT side of any account; an entry made to the RIGHT side of the account.
Examples: Liabilities, Common Stock, Retained Earnings, Revenues.
, Normal Balances of accounts- types of accounts - ✔✔The balance that appears on the side of
an account where increases are recorded; the expected balance of an account.
Examples:
Assets + on the DEBIT side, so the normal balance of an asset is on the DEBIT side.
Liabilities + on the CREDIT side, so the normal balance of a liability is on the CREDIT side.
Accrual Accounting - ✔✔Records revenues when earned and expenses when incurred without
regard to when cash is exchanged.
Matching Principal - ✔✔Recording expenses in the time period they were incurred to produce
revenues, thus matching them against the revenues earned during that same period.
Temporary Account(s) - ✔✔The revenue, expense, and dividend accounts; these accounts are
closed at the end of the accounting period.
Permanent Account(s) - ✔✔The asset, liability, and stockholder's equity/ owner's equity
accounts; these accounts are not closed at the end of the accounting period.
Periodic Inventory - ✔✔An inventory system in which the business does not keep a continuous
record of inventory on hand. at the end of the accounting period, a physical count of inventory
is taken and is used to determine the cost of ending inventory and the cost of goods sold.
Perpetual Inventory - ✔✔An inventory system in which the business keeps a continuous record
of inventory on hand and the cost of the goods sold.
Gross Profit - ✔✔Net sales revenue minus the cost of goods sold; also called gross margin.
Sales - Cost of Goods Sold (COGS)
