ACC 151 Chapter Notes - Chapter 3: Deferral, Income Statement, Fiscal Year

101 views4 pages

ochreporpoise133

26 Sep 2016

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Accrual accounting: records the impact of business transactions as it occurs. Even if the business receives or pays no cash. Cash-basis accounting: records only cash transactions- cash receipts and cash payments. Do not follow gaap- financial statements omit important information. Making sale, not collecting cash, increases your wealth. Balance-sheet defect: if we fail to record a sale on account, balance sheet reports no account receivable. Receivable represents a claim to receive cash in the future, which is a real asset, and so it should appear on balance sheet. Income statement defect: a sale on account provides revenue that increases the company"s wealth. Ignoring the sale understates revenue and net income on the income statement. Accrual of expenses incurred but not yet paid. Usage of prepaid rent, insurance and supplies. Earning of revenue when cash was collected in advance. Liquidation: to shut down, sell the assets, pay for liabilities, and return any leftover cash to the owners.

Related Questions

1. Which statement is normally prepared first? (Points : 3) Income statement Balance sheet Statement of cash flows Retained earnings statement2. When a business borrows money, it incurs a(n) (Points : 3) tax. liability. cash payment. all of these.3. More than 70% of businesses are organized as what type of business? (Points : 3) Not-for-profit Corporation Partnership Sole proprietorship4. Brennan, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $40,000 during 2009. Which of the following statements is correct? (Points : 3) Net income for 2009 totaled $19,000. Net income for 2009 totaled $59,000. Total retained earnings increased by $59,000 during 2009. Total retained earnings decreased by $40,000 during 2009.5. The statement of cash flows is integrated with the balance sheet because (Points : 3) the cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet. the cash at the beginning of the period plus or minus the net income equals the end of period cash reported on the balance sheet. the cash at the beginning of the period plus or minus assets and liabilities equals the end of period cash reported on the balance sheet. the cash at the beginning of the period plus or minus the cash flows from operating activities equals the end of period cash reported on the balance sheet.6. The basic financial statements do NOT include the (Points : 3) income statement. tax return balance sheet. statement of cash flows.7. A __________ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded. (Points : 3) framework control set of rules transaction8. The payment of a liability (Points : 3) decreases assets and stockholders' equity. increases assets and decreases liabilities. decreases assets and increases liabilities. decreases assets and decreases liabilities. 9. Co. received $1,000 from Newbie as rent for the use of a building owned by UNI. How does this transaction affect UNI's accounts if UNI recognizes a liability? (Points : 3) Cash is increased and revenue is increased. Cash is increased and revenue is decreased. Cash is increased and unearned revenue is increased. It is not recorded.10. Depreciation Expense and Accumulated Depreciation are classified, respectively, as (Points : 3) expense and contra asset. asset and contra liability. revenue and asset. contra asset and expense.11. Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become __________ over time. (Points : 3) Liabilities Assets stockholders%u2019 equity Expenses12. A&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M%u2019s accounts? (Points : 3) Increase accounts receivable and cash by $1,000,000 each Increase accounts receivable and revenues by $1,000,000 each Increase accounts receivable and unearned revenues by $1,000,000 each No effect at this time13. Multiple-step income statements show: (Points : 3) gross profit but not income from operations. neither gross profit nor income from operations. both gross profit and income from operations. income from operations but not gross profit.14. Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet? (Points : 3) As a revenue As the cost of merchandise sold It does not appear on the Balance Sheet As a current asset15. The credit terms of a sale are normally indicated on a(n) (Points : 3) purchase order. invoice. bill of lading. account receivable.16. Inventory shortage is recorded when (Points : 3) merchandise is returned by a buyer. merchandise purchased from a seller is incomplete or short. merchandise is returned to a seller. there is a difference between a physical count of inventory and inventory records. 17. The bank reconciliation (Points : 3) should be prepared by an employee who records cash transactions. is part of the internal control system. is for information purposes only. is sent to the bank for verification.18. A special cash fund used to make small payments that occur frequently is called a(n) (Points : 3) operating expenses fund. change fund. market fund. petty cash fund.19. The objectives of internal control are to (Points : 3) control the internal organization of the accounting department personnel and equipment. provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with. prevent fraud and promote the social interest of the company. provide control over %u201Cinternal-use only%u201D reports and employee internal conduct.20. When a firm uses internal auditors, it is adhering to which of the following internal control elements? (Points : 3) Risk assessment Proofs and security measures Monitoring Separating responsibilities for related operations21. What type of account is Allowance for Doubtful Accounts? (Points : 3) Contra asset Asset Revenue Expense22. Merchandise inventory is reported on the balance sheet in the section entitled (Points : 3) current assets. fixed assets. current liabilities. stockholders' equity.23. Receivables are usually a significant portion of (Points : 3) total current liabilities. total liabilities. total current assets. total assets.24. The inventory data for an item for November are: Nov.1 Inventory 25 units at $20 10 Purchased 30 units at $21 30 Purchased 10 units at $22 Sold 35 unitsUsing the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30? (Points : 3) $640 $605 $623 $66025. All amounts paid to get an asset in place and ready for use are referred to as (Points : 3) capital expenditures. revenue expenditures. residual value. cost of an asset.26. Fixed assets are ordinarily presented in the balance sheet (Points : 3) at current market values. at replacement costs. at cost less accumulated depreciation. in a separate section along with intangible assets.27. Goodwill is (Points : 3) amortized similar to other intangibles. only written down if an impairment in value occurs. charged to expense immediately. amortized over 40 years or its economic life, whichever is shorter.28. If a capital expenditure is treated as a revenue expenditure, then (Points : 3) expenses are overstated and owners' equity is understated. expenses are overstated and assets are overstated. expenses are understated and owners' equity is overstated. net income is overstated and owners' equity is understated.29. A bond indenture is (Points : 3) a contract between the corporation issuing the bonds and the underwriters selling the bonds. the amount due at the maturity date of the bonds. a contract between the corporation issuing the bonds and the bondholders. the amount for which the corporation can buy back the bonds prior to the maturity date.30. Gross earnings for a payroll period less payroll deductions are referred to as (Points : 3) overtime pay. bonus pay. gross pay. net pay.31. How is treasury stock shown on the balance sheet? (Points : 3) As an asset As a decrease in stockholders' equity As an increase in stockholders' equity Treasury stock is not shown on the balance sheet.32. Current liabilities are (Points : 3) due but not receivable for more than one year. due but not payable for more than one year. due and receivable within one year. due and payable within one year.33. The total earnings of an employee for a payroll period are referred to as (Points : 3) take-home pay. pay net of taxes. net pay. gross pay.34. Where is interest expense listed on the income statement? (Points : 3) Other expense section Cost of merchandise sold Operating expenses Interest expense is on the balance sheet, not the income statement.35. A corporation has 50,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be (Points : 3) 200,000 shares. 50,000 shares. 250,000 shares. 12,500 shares.

sangriaporpoise636

How do you reply to this post? Minimum of 150 words. Thank youin advance!

Cash Basis accounting is a very straight forward, single-entryapproach that can work for small businesses that do not have toomany accounts or financial transactions to manage nor do theymaintain large amounts of assets.

Some of the few advantages for this approach is that since it isa straightforward, you receive cash for products sold or servicerendered with minimal delay in between transactions, bookkeeping issimple enough that anyone can understand which âeliminates theneed to a trained bookkeeper or accountantâ(Business-Case-Analysis.com). This works well for soleproprietorship operating businesses if there are no financialstatement requirements to be published. It makes it easier for thebusiness to keep tract of their revenues within a few transactionssince it only records when cash is received or expenses are paid.âCash accounting ensures that taxes are not paid on monies thathave not yet been received; this improves cash flow and ensuresthat funds are available for tax expenditures.â(Mysmp.com).

Some of the disadvantages using cash basis is since it is asingle entry, vice double entry, there is more room for errorunlike accrual where double entry is used, every credit is indirect relation to every debit, there is a way to verify entries.Also, since it can only record revenues when cash is received orexpenses are paid, it does not have to ability to account forpromissory notes and accounts receivable. This significantly lowerstheir possibility for bigger revenue since they can only recordactual movement of cash when it happens. This simplicity also worksagainst the business, âBecause cash accounting is so simple, itdoes not allow for tracking the actual dates of sales andpurchases. Additionally, it usually does not provide a means ofmatching these transactions to specific items of inventoryâ(Mysmp.com). Because this approach can only record actual movementor revenue when it happens, the balance sheet could be inaccuratelyrecorded and could contribute to errors leading to missed paymentsof monies owed or missed revenues owed to them.

Reference:

https://www.business-case-analysis.com/cash-basis-accounting.html

www.mysmp.com/fundamental-analysis/cash-accounting.html

yellowprairie-dog170

35.A corporation has 50,000 shares of $100 par value stockoutstanding. If the corporation issues a 4-for-1 stock split, thenumber of shares outstanding after the split will be (Points :3)

200,000 shares.
50,000 shares.
250,000 shares.
12,500 shares.

ACC 151 Chapter Notes - Chapter 3: Deferral, Income Statement, Fiscal Year

Document Summary

Get access

Related Documents

ACC 151 Lecture Notes - Lecture 4: Retained Earnings, Accrual, Accounting Period

BUS 201 Chapter Notes - Chapter 3: Accrual, Deferral, Income Statement

ADM 1340 Chapter Notes - Chapter 3: Earnings Before Interest And Taxes, Income Statement, Current Liability

Related Questions