ACCT 207 FINAL EXAM ACCURATE STUDY GUIDE
Income Statement - Answers - 1. Revenues
2. Expenses
3. Difference of that is Net income/loss
Balance Sheet - Answers - 1. Assets
2. Liabilities
3. Stockholders Equity
4. Assets Should Equal Liabilities & Stockholders Equity
Matching Principle - Answers - matches expenses with revenues in the period when the
company makes efforts to generate those revenues.
Example: A salesman earns a 5% commission on sales shipped and recorded in
January. The commission of $5,000 is paid in February. You should record the
commission expense in January.
Revenue Recognition Principle - Answers - An accounting principle under the GAAP
that determines the specific conditions under which income becomes realized as
revenue. Generally, revenue is recognized only when a specific critical event has
occurred and the amount of revenue is measurable.
Cash Method of Accounting - Answers - Is the more commonly used method of
accounting in small business. Income is not counted until cash ( or a check ) is actually
received, and expenses are not counted until they are actually paid.
Accrual Method of Accounting - Answers - Transactions are counted when the order is
made, the item is delivered, or the services occur, regardless of when the money us
actually received or paid. In other words, income is counted when the sale occurs, and
expenses are counted when you receive the goods or services. You don't have to wait
until you see the money, or actually pay money out of your checking account to record a
transaction.
GAAP - Answers - Generally Accepted Accounting Principles.
The common set of accounting principles, standards, and procedures that companies
use to compile their financial statements. Companies that use GAAP must maintain
their accounting records by using the Accrual basis of Accounting.
SOX - Answers - Sarbanes- Oxley Act of 2002.
Regulations passed by congress to reduce unethical corporate behavior.
Debits - Answers - Left side (What You Have)
Dividends
Expenses
, Assets (Decrease in Assets is a credit)
Losses
Credits - Answers - Right side (What You Owe)
Gains
Income
Revenues
Liabilities (Decrease in Liability is a debit)
Stockholders Equity, Common Stock
Retained Earnings
FIFO - Answers - First in, First Out
An inventory costing method that assumes the earliest goods purchased are the first to
be sold. Most companies use FIFO
LIFO - Answers - Last in, First Out
An inventory costing method that assumes that the latest units purchased are the first to
be sold. Results in the lowest taxable income during inflation.
FOB Destination - Answers - Freight Terms indicating that ownership of goods remains
with the seller until the goods reach the buyer.
FOB Shipping Point - Answers - Freight Terms indicating that ownership of goods
passes to the buyer when the public carrier accepts the goods from the seller.
Specific Identification Method - Answers - Used if a company can positively identify
which particular units are sold and which are still in ending inventory.
Perpetual Inventory - Answers - Inventory levels are known, look at a computer and
know exactly what is there. Most businesses are Perpetual now a days, (Even though
you know your inventory, at least once a year perpetual businesses will take a physical
inventory to minimize inventory shrinkage.) Also, two entries are required to make a
sale.
Periodic Inventory - Answers - There is a physical inventory count done. They do this
usually quarterly, but it could be done just once a month.
Accounts Receivable - Answers - Amounts customers owe to an account.
Cost - Answers - Consists of all expenditures necessary to acquire an asset and make it
ready for its intended use.
Revenue Expenditures - Answers - Expenditures that are immediately charged against
revenues as an expense.
Income Statement - Answers - 1. Revenues
2. Expenses
3. Difference of that is Net income/loss
Balance Sheet - Answers - 1. Assets
2. Liabilities
3. Stockholders Equity
4. Assets Should Equal Liabilities & Stockholders Equity
Matching Principle - Answers - matches expenses with revenues in the period when the
company makes efforts to generate those revenues.
Example: A salesman earns a 5% commission on sales shipped and recorded in
January. The commission of $5,000 is paid in February. You should record the
commission expense in January.
Revenue Recognition Principle - Answers - An accounting principle under the GAAP
that determines the specific conditions under which income becomes realized as
revenue. Generally, revenue is recognized only when a specific critical event has
occurred and the amount of revenue is measurable.
Cash Method of Accounting - Answers - Is the more commonly used method of
accounting in small business. Income is not counted until cash ( or a check ) is actually
received, and expenses are not counted until they are actually paid.
Accrual Method of Accounting - Answers - Transactions are counted when the order is
made, the item is delivered, or the services occur, regardless of when the money us
actually received or paid. In other words, income is counted when the sale occurs, and
expenses are counted when you receive the goods or services. You don't have to wait
until you see the money, or actually pay money out of your checking account to record a
transaction.
GAAP - Answers - Generally Accepted Accounting Principles.
The common set of accounting principles, standards, and procedures that companies
use to compile their financial statements. Companies that use GAAP must maintain
their accounting records by using the Accrual basis of Accounting.
SOX - Answers - Sarbanes- Oxley Act of 2002.
Regulations passed by congress to reduce unethical corporate behavior.
Debits - Answers - Left side (What You Have)
Dividends
Expenses
, Assets (Decrease in Assets is a credit)
Losses
Credits - Answers - Right side (What You Owe)
Gains
Income
Revenues
Liabilities (Decrease in Liability is a debit)
Stockholders Equity, Common Stock
Retained Earnings
FIFO - Answers - First in, First Out
An inventory costing method that assumes the earliest goods purchased are the first to
be sold. Most companies use FIFO
LIFO - Answers - Last in, First Out
An inventory costing method that assumes that the latest units purchased are the first to
be sold. Results in the lowest taxable income during inflation.
FOB Destination - Answers - Freight Terms indicating that ownership of goods remains
with the seller until the goods reach the buyer.
FOB Shipping Point - Answers - Freight Terms indicating that ownership of goods
passes to the buyer when the public carrier accepts the goods from the seller.
Specific Identification Method - Answers - Used if a company can positively identify
which particular units are sold and which are still in ending inventory.
Perpetual Inventory - Answers - Inventory levels are known, look at a computer and
know exactly what is there. Most businesses are Perpetual now a days, (Even though
you know your inventory, at least once a year perpetual businesses will take a physical
inventory to minimize inventory shrinkage.) Also, two entries are required to make a
sale.
Periodic Inventory - Answers - There is a physical inventory count done. They do this
usually quarterly, but it could be done just once a month.
Accounts Receivable - Answers - Amounts customers owe to an account.
Cost - Answers - Consists of all expenditures necessary to acquire an asset and make it
ready for its intended use.
Revenue Expenditures - Answers - Expenditures that are immediately charged against
revenues as an expense.
