Accounting Concept: A source document
is prepared for each transaction
Accounting Concept: Business transactions are
stated in numbers that have common values; that
is, using a common unit of measurement
Accounting Concept: Changes in financial
information are reported for a specific period of
time in the form of financial statements.
Objective Evidence
Unit of Measurement
Accounting Period Cycle
Accounting Concept: Financial information
is recorded and reported separately from the
owner's personal financial information
Business Entity
Accounting Concept: Financial statements
are prepared with the expectation that a
business will remain in operation indefinitely
Going Concern
Accounting Concept: Financial statements
contain all information necessary to
understand a business's financial condition.
Adequate Disclosure
Accounting Concept: Revenue from business activities
and expenses associated with earning that revenue
are recorded in the same accounting period
Matching Expenses with
Revenue
Accounting Concept: Revenue is recorded
at the time goods or services are sold
Realization of Revenue
Accounting Concept: The actual amount
paid for merchandise or other items
bought is recorded
Historical Cost
Accounting Concept: The same
accounting procedures are followed in
the same way in each accounting period
Consistent Reporting
Accounts Payable extends to which column
of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Balance Sheet Credit
Accounts Payable-Asset,
Liability, or Owner's Equity
Liability
Accounts Receivable extends to which
column of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Balance Sheet Debit
Accounts Receivable-Asset,
Liability, or Owner's Equity
Asset
All temporary accounts should equal
_______ when closing entries are done.
Zero
Are permanent accounts
nominal or real accounts?
Real
Are temporary accounts
nominal or real accounts?
Nominal
Assets-Normal Balance?
Debit
Cash-Asset, Liability, or
Owner's Equity
Asset
Expenses-Normal Balance?
Debit
Furniture-Asset, Liability, or
Owner's Equity
Asset
How do you find the component
percentage for Gross Profit?
Gross Profit/Sales (always
divide by sales)
How do you find the component
percentage for Net Inome?
Net Income/Sales (always
divide by sales)
If there is a credit balance in the Income
Summary account after closing 1st two
accounts, is there a net income or net loss?
Net Income (Revenues >
Expenses)
If there is a debit balance in the Income
Summary account after closing 1st two
accounts, is there a net income or net loss?
Net Loss (Expenses >
Revenues)
Income Summary-Normal
Balance?
NONE
Liabilities-Normal Balance?
Credit
Membership Fees Income would extend to which
column of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Income Statement Credit
Membership Fees IncomeNormal Balance?
Credit (type of revenue)
Merchandise Inventory extends to which
column of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Balance Sheet Debit
Merchandise Inventory-Asset,
Liability, or Owner's Equity
Asset
Merchandise InventoryNormal Balance?
Debit
Office Equipment-Asset,
Liability, or Owner's Equity
Asset
On the line for Prepaid Insurance on the work sheet, the
amount extended to the Balance Sheet Debit column
represents the value of insurance premiums: on hand for
next period, bought during period, or expired/used up?
Insurance that is still ON
HAND for the next period
On the line for Supplies Expense on the work sheet,
the amount extended to the Income Statement Debit
column represents the value of supplies that are: on
hand, bought during period, or used up?
Supplies that are USED UP
during the period
Owner, Capital extends to which column of
the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Balance Sheet Credit
Owner, Capital-Asset,
Liability, or Owner's Equity
Owner's Equity
Owner, Capital-Normal
Balance?
Credit
Owner, Drawing extends to which column
of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Balance Sheet Debit
Owner, Drawing-Asset,
Liability, or Owner's Equity
Owner's Equity
Owner, Drawing-Normal
Balance?
Debit
Petty Cash-Asset, Liability, or
Owner's Equity
Asset
Prepaid Insurance extends to which column
of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Balance Sheet Debit
Prepaid Insurance-Asset,
Liability, or Owner's Equity
Asset
Purchases Discounts, Returns, or
Allowances-Normal Balance?
Credit
Purchases extends to which column of the
worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Income Statement Debit
Purchases Returns and Allowances extends to which
column of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Income Statement Credit
Purchases-Normal Balance?
Debit
Rent Expense extends to which column of
the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Income Statement Debit
Revenues-Normal Balance?
Credit
Sales Discounts extends to which column
of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Income Statement Debit
Sales Discounts, Returns, or
Allowances-Normal Balance?
Debit
Sales extends to which column of the
worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Income Statement Credit
Sales Tax Payable extends to which column
of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Balance Sheet Credit
Supplies Expense extends to which column
of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Income Statement Debit
Supplies-Asset, Liability, or
Owner's Equity
Asset
There are 3 ways to find Net
Income, what are they?
*Sales - Expenses = Net Income (Loss)
*The ending balance of the Income Summary account
after 1st two closing entries have been recorded
*Gross Profit - Expenses = Net Income (Loss)
This is the amount of pay an employee
receives after deductions are taken from
their gross pay.
Net Pay (AKA "Take Home
Pay)
This is the total amount of an employee's
earnings before any deductions are
calculated.
Gross Pay
To find the balance of Capital on the
Income Statement, which equation could
you use?
Beginning Capital
+/- Net Income (or Net Loss)
- Drawing
+ Investments
Transportation In extends to which column
of the worksheet? Income Statement
Debit/Credit or Balance Sheet Debit/Credit
Income Statement Debit
Transportation In-Normal
Balance?
Debit
True or False: The amount shown on the Post
Closing Trial Balance for Capital should show the
ending balances for the temporary accounts?
True: All temporary accounts will be closed. Expenses
and Sales close into Income Summary and then
Income Summary and Drawing into Capital;
therefore, all end up in Capital eventually.
What are the three permanent
accounts?
Assets, Liabilities, Capital
What does the term of sale
2/10, n/30 mean?
A cash discount of 2% is allowed if paid
within 10 days. If not, the balance is due
in 30 days
What entries should be made:
Paid rent for month of January
Debit Rent Expense; Credit
Cash
What entries should be made:
Purchased supplies on account
Debit Supplies; Credit
Accounts Payable
What entries should be made:
Received cash on accounts
Debit Cash; Credit Accounts
Receivable
What entries should be made:
Sold services on account
Debit Accounts Receivable;
Credit Sales
What entries should be made:
Bought furniture on account
Debit Office Furniture; Credit
Accounts Payable
What entries should be made:
Established a petty cash fund
Debit Petty Cash; Credit Cash
What entries should be made:
Owner invested computer equipment in
the business
Debit Equipment; Credit
Owner, Capital
What entries should be made:
Owner invested money in business
Debit Cash; Credit Owner,
Capital
What entries should be made:
Paid invoice price on account
Debit Accounts Payable;
Credit Cash
What entries should be made:
Received payment on account
Debit Cash; Credit Accounts
Receivable
What entries should be made:
Sold services on account
Debit Accounts Receivable;
Credit Sales
What entries should be made:
Wrote a check to owner for personal use
Debit Owner, Drawing; Credit
Cash
What is it called when you record
entries in a general journal?
Journalizing
What is it called when you record
entries in a general ledger?
Posting
What is the accounting
equation?
Assets = Liabilities + Owner's
Equity
What is the entry to adjust for a decrease
in Merchandise Inventory?
Debit Income Summary;
Credit Merchandise Inventory
What is the entry to adjust for an increase
in Merchandise Inventory during the
period?
Debit Merchandise Inventory;
Credit Income Summary
What is the entry to adjust Supplies that
have been used up during the period?
Debit Supplies Expense;
Credit Supplies
What is the entry to adjust the Prepaid
Insurance that has expired during the
period?
Debit Insurance Expense;
Credit Prepaid Insurance
What is the equation for Cost of
Delivered Merchandise?
Purchases + Transportation In =
Cost of Delivered Merchandise
What is the equation for Cost of
Merchandise Available for Sale?
Beginning Merchandise
Inventory + Net Purchases
What is the equation for Cost
of Merchandise Sold?
Beginning Merchandise Inventory
+ Net Purchases
= Cost of Merchandise Available for Sale
- Ending Merchandise Inventory
= Cost of Merchandise Available for Sale
What is the equation for Gross
Profit?
Net sales - Cost of
Merchandise Sold
What is the equation to find
Net Purchases?
Purchases
+ Transportation In
- Purchases Discounts
- Purchases Returns & Allowances
= Net Purchases
What is the equation to find
Net Sales?
Sales
- Sales Discounts
-Sales Returns and Allowances
= Net Sales
What is the general ledger account called
that summarizes or totals the balances of
accounts in a subsidiary ledger?
Controlling Account
What is the order of closing
accounts? (there are 4 steps)
1. Revenues
2. Expenses
3. Income Summary
4. Drawing
Which account do Expenses
close into?
Income Summary
Which account do Revenues
close into?
Income Summary
Which account does Drawing
close into?
Capital
Which account does Income
Summary close into?
Capital
Which accounts are on the
Balance Sheet?
Assets, Liabilities, Owner's
Equity (Capital and Drawing)
Which accounts are on the
Income Statement?
Revenues (Sales), Expenses,
Income Summary, Purchases