The accounting equation can be expressed as
Assets = Liabilities + Shareholder's Equity.

The accounting equation can be expressed as
Assets + Liabilities = Shareholder's Equity.

f Assets total $10,000 and Liabilities are $4,000,
Equity must be $14,000.

Accounts Receivable are an asset.

Liabilities are debts owed by the business entity.

Dividends a company pays reduce net income

The Financial Accounting Standards Board (FASB) is the
authoritative body that has primary responsibility for developing
accounting principles

The Securities Exchange Commission (SEC) has regulatory authority over
all corporations

The primary role of accounting is to provide many different users
(stakeholders) with financial information needed to make
economic decisions

The Cash account is increased with a

The Sales Revenue account is increased with a

The Equipment account is increased with a

The Loan Payable account is increased with a

The chart of accounts should be the same for each business

To determine the balance in an account, always
subtract credits from debits.

To determine the balance in an account which has a normal credit balance, always subtract debits from credits.

Both debits and credit entries are posted to accounts like Cash and Inventory

The Inventory account may have a credit balance.

Revenues – Expenses = Net Income.

If Assets total $30,000 and Equity is $21,000, Liabilities must be $9,000.

Providing services to a customer increases revenue which increases equity

the inventory account is decreased with a credit when a product is delivered to a coustomer

The transactions that have been “journalized” are “posted” to the general ledger.

Revenue and liability accounts are increased with a debit.

Consuming goods and services in the process of generating revenues results in expenses.

Debiting the asset account “Accounts Receivable” will increase the account.

The expense account “Rent Expense” may have a credit balance.

If inventory is purchased “on account,” the liability is credited to Accounts Receivable.

Revenue and liability accounts are increased with a debit

The matching concept

Retainers received in cash by a law firm in advance of providing legal services is an example of

A law firm has provided legal services to a client but has not invoiced/billed the client is an example of

Paying three months of rent in advance is an example of

On December 31st a calendar year corporation owes employees unpaid payroll

Expenses result from selling services or products to customers.

Prepaid expenses are an expense and appear on the income statement.

When a business receives a bill from the utility company, no entry should be made until the invoice is paid

An example of deferred (unearned) revenue is Unearned Car Insurance Premium Revenue on an insurance company’s balance sheet.

If the adjusting entry to recognize expired prepaid auto insurance at the end of the period is inadvertently omitted, insurance expense will be understated and net income overstated.

The difference between the balance of a fixed asset account and the balance of its related accumulated depreciation account is termed the book value of the asset.

Accumulated depreciation is reported on the income statement.

A company depreciates its equipment $600 a year.  The adjusting entry on December 31 is a debit to Depreciation Expense, $600, and a credit to Equipment, $600.

Office Furniture is an example of a current asset.

Inventory is reported as a current asset

A company pays $12,000 for twelve months' rent on November 1st, recording the prepayment as an asset.  The adjusting entry on December 31 is a debit to Rent Expense, $2,000, and a credit to Prepaid Rent, $2,000.

The company debits cost of goods sold when it buys merchandise to resell to its customers.

Accruals are needed when:

an unrecorded expense has been incurred or

an unrecorded revenue has been earned.

Generally accepted accounting principles require cash‐basis accounting.

The revenue recognition principle states that revenue should be recorded only when the cash is received from the customer

An account in its simplest form has three parts to it: a title, an increase side, and a decrease side.

An adjusting entry would adjust revenue so it is reported when earned and not when the cash was received.

Salary and wage expenses are recorded when the cash is direct deposited into their bank accounts.

Salaries and Wages are recorded as expenses only when the employee receives their paycheck.

A company pays $48,000 for twelve months' rent on October 1, recording the prepayment as an asset.  The adjusting entry on December 31 is a debit to Rent Expense, $12,000, and a credit to Prepaid Rent, $12,000.

A company buys a laptop for $3,600 on January 2nd. It plans to use the laptop for 3 years. It depreciates equipment using straight line (same amount of depreciation each year).  The adjusting entry on December 31st is a debit to Depreciation Expense, $1,200, and a credit to Accumulated Depreciation.

Microsoft receives your payment for a 12 month subscription to Office 365. For Microsoft this is a/an

Microsoft receives your payment for a 12 month subscription to Office 365. For you, the customer, this is a/an

A company agrees to reimburse travel expenses next month for a business trip completed this month by an employee. For the company, this is a/an

A customer is interested in buying a soon to be released new version of an iPhone and pays for the phone in advance. From the customers’ point of view, this is a/an

A customer is interested in buying a soon to be released new version of an iPhone and pays for the phone in advance. From the retailer’s point of view, this is a/an