Accounting Game Chapter 4

Raw materials

Finished goods

Work-in-process (WIP)

<p>To recognize the cost of production and increase cash flow</p> Signup and view all the answers

<p>Beginning Inventory + Purchases + Labor Total Available for Sale - Ending Inventory = COST OF GOODS SOLD</p> Signup and view all the answers

<p>Total Sales - Cost of Goods Sold = GROSS PROFIT</p> Signup and view all the answers

<p>Net Profit Before Taxes - Income Taxes = NET PROFIT AFTER TAXES</p> Signup and view all the answers

<p>When it is paid in advance and has value into future accounting periods.</p> Signup and view all the answers

<p>It gets used up.</p> Signup and view all the answers

<p>The Accrual Method.</p> Signup and view all the answers

<p>When they are earned, not when the money is received.</p> Signup and view all the answers

<p>The moved-away friend not paying his debt is considered a bad debt and it has a negative impact on the business's financial records.</p> Signup and view all the answers

<p>To recognize a bad debt, we reduce the Accounts Receivable by the amount of the debt.</p> Signup and view all the answers

<p>A bad debt is considered an expense and it reduces earnings.</p> Signup and view all the answers

<p>We record the bad debt expense on the Income Statement.</p> Signup and view all the answers

<p>Interest expense represents the cost of borrowing money and is an expense that reduces earnings.</p> Signup and view all the answers

<p>An insurance policy provides coverage and protection for the lemonade business in case of any unforeseen events or liabilities.</p> Signup and view all the answers

<p>The insurance policy has a value as it is an asset that the business now possesses.</p> Signup and view all the answers

<p>A prepaid expense refers to an expense paid in advance. It is recorded as an asset on the balance sheet and reduces cash.</p> Signup and view all the answers

<p>50 lemons</p> Signup and view all the answers

<p>20 cents</p> Signup and view all the answers

<p>5 pounds</p> Signup and view all the answers

<p>The purpose of an income statement is to show the financial performance of a business over a specific period of time, typically a month, quarter, or year. It provides information on revenues, expenses, and net profit or loss.</p> Signup and view all the answers

<p>Net Profit = Revenues - Expenses</p> Signup and view all the answers

<p>Bad debt expense reduces net profit. It is an expense that reflects the amount of accounts receivable that is estimated to be uncollectible.</p> Signup and view all the answers

<p>Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory</p> Signup and view all the answers

<p>50 lemons</p> Signup and view all the answers

<p>5 pounds</p> Signup and view all the answers

<p>$1</p> Signup and view all the answers

<p>The purpose of an Income Statement is to show the revenue, expenses, and net profit of a business during a specific period of time.</p> Signup and view all the answers

<p>Net Profit = Sales - Cost of Production - Expenses</p> Signup and view all the answers

<p>Cost of Production = Cost of Ingredients + Labor Cost</p> Signup and view all the answers

<p>Assets = Liabilities + Owner's Equity</p> Signup and view all the answers