Intermediate Accounting Exam 1: Chapters 1, 2, 3, 4 Questions and Answers 100% Correct!

transactions recorded under accrual accounting - ANSWER-Records revenues when earned and expenses when incurred debit and credit - ANSWER-the left and right side of an account, does not imply increases or decreases normal balance - ANSWER-the expected balance in an account, the side that increases the value of the account cash basis accounting - ANSWER-companies only recognize revenue when cash is received and expenses when cash is paid temporary accounts - ANSWER-income statement accounts, dividends permanent accounts - ANSWER-balance sheet accounts four closing entries for temporary accounts - ANSWER-REVENUE: Debit revenue and gain accounts Credit Income summary EXPENSE: Debit Income summary for total expenses Credit each expense INCOME SUMMARY: Debit income summary Credit retained earnings (net income)/// Debit retained earnings Credit income summary (net loss) DIVIDENDS: Debit retained earnings Credit dividends accounting equation - ANSWER-assets = liabilities + stockholders equity ending retained earnings equation - ANSWER-end re= beg re + net increases + net income/loss - dividends equity investors - ANSWER-shareholders of the company creditors and other debt investors - ANSWER-entities including banks and other financial institutions that lend money to the company either through a private agreement or through a public debt offering competitiors - ANSWER-companies that produce the same service or product financial analysts - ANSWER-employed at investment banks, commercial banks, etc that use financial info to provide guidance to individuals and other entities in making investment and credit decisions employ