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Key Concepts in Accounting
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Key Concepts in Accounting

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@PatientYttrium

Questions and Answers

What are Accounts Receivable?

  • Equity
  • Assets (correct)
  • Expenses
  • Liabilities

    • Long term debt is a?

  • Asset
  • Equity
  • Expense
  • Liability (correct)

    • Merchandise inventory is?

  • Liability
  • Asset (correct)
  • Equity
  • Expense

    • Prepaid expenses are?

    <p>Assets</p> Signup and view all the answers

    Accrued expenses payable are?

    <p>Liabilities</p> Signup and view all the answers

    Equipment is?

    <p>Asset</p> Signup and view all the answers

    Notes payable are?

    <p>Liabilities</p> Signup and view all the answers

    Retained earnings are?

    <p>Stockholders' Equity</p> Signup and view all the answers

    Land is?

    <p>Asset</p> Signup and view all the answers

    Accounts payable is?

    <p>Liability</p> Signup and view all the answers

    Common stock is?

    <p>Stockholders' Equity</p> Signup and view all the answers

    Supplies are?

    <p>Assets</p> Signup and view all the answers

    What forms of organization will enable the owners of Regal Signs to limit their risk of loss?

    <p>Corporation, Limited-liability partnership, Limited-liability company</p> Signup and view all the answers

    Creditors can force the owners to pay the business's debts from their personal assets if any of these businesses fails.

    <p>False</p> Signup and view all the answers

    The most an investor can expect to lose on an investment in these businesses is?

    <p>The amount invested</p> Signup and view all the answers

    What form of business organization will give Megan Regal the most freedom to manage the business as she wishes?

    <p>Proprietorship</p> Signup and view all the answers

    Proprietorships offer the most freedom because?

    <p>There is a single owner, so the owner has absolute control over the business.</p> Signup and view all the answers

    What form of organization will give creditors the maximum protection in the event that Regal Signs, Inc., fails?

    <p>Partnership</p> Signup and view all the answers

    If a partnership fails and cannot pay its liabilities, creditors can force the partners to pay the business's debts from their personal assets.

    <p>True</p> Signup and view all the answers

    Partnerships afford more protection for creditors than a?

    <p>Proprietorship</p> Signup and view all the answers

    On which financial statement are accounts payable listed?

    <p>Balance sheet</p> Signup and view all the answers

    On which financial statement is inventory listed?

    <p>Balance sheet</p> Signup and view all the answers

    On which financial statement is interest revenue listed?

    <p>Income statement</p> Signup and view all the answers

    On which financial statement is long-term debt listed?

    <p>Balance sheet</p> Signup and view all the answers

    On which financial statement is net cash used for financial activities listed?

    <p>Statement of cash flows</p> Signup and view all the answers

    On which financial statement is salary expense listed?

    <p>Income statement</p> Signup and view all the answers

    On which financial statement is cash listed?

    <p>Balance sheet and statement of cash flows</p> Signup and view all the answers

    On which financial statement are dividends listed?

    <p>Statement of cash flows and retained earnings</p> Signup and view all the answers

    On which financial statement are the increase or decrease in cash listed?

    <p>Cash flows</p> Signup and view all the answers

    On which statement is net income listed?

    <p>Cash flows, income statement, retained earnings</p> Signup and view all the answers

    On which financial statement is net cash provided by operating activities listed?

    <p>Cash flows</p> Signup and view all the answers

    On which financial statement are retained earnings listed?

    <p>Balance sheet, retained earnings</p> Signup and view all the answers

    On which financial statement is sales revenue listed?

    <p>Income statement</p> Signup and view all the answers

    On which financial statement is common stock listed?

    <p>Balance sheet</p> Signup and view all the answers

    Ethics is the factor that?

    <p>Should be included in every business and accounting decision, beyond the potential economic and legal consequences.</p> Signup and view all the answers

    Ideally, for each ethical decision?

    <p>Honesty and truthfulness should prevail, considering the rights of others.</p> Signup and view all the answers

    Which three questions are important to consider when making an ethical decision?

    <p>Who will be affected by the decision?</p> Signup and view all the answers

    Liabilities + stockholders' equity = ?

    <p>Assets</p> Signup and view all the answers

    Assets - stockholders' equity = ?

    <p>Liabilities</p> Signup and view all the answers

    Assets - liabilities = ?

    <p>Stockholders' equity</p> Signup and view all the answers

    (Liabilities / Assets) * 100 = ?

    <p>Percent of liabilities</p> Signup and view all the answers

    Heading of income statement?

    <p>Company Name, Income Statement, Month ended &amp; date</p> Signup and view all the answers

    Revenue on income statement?

    <p>Service revenue</p> Signup and view all the answers

    Expenses on income statement?

    <p>Utilities expense, salary expense, rent expense</p> Signup and view all the answers

    Heading of statement of retained earnings?

    <p>Company name, Statement of Retained Earnings, Month ended &amp; date</p> Signup and view all the answers

    On retained earnings, you add?

    <p>Net income for the period</p> Signup and view all the answers

    On retained earnings, you subtract?

    <p>Dividends</p> Signup and view all the answers

    Heading on balance sheet?

    <p>Company name, Balance sheet, Date</p> Signup and view all the answers

    Current assets on balance sheet?

    <p>Cash, accounts receivable</p> Signup and view all the answers

    Long-term assets on balance sheet?

    <p>Notes receivable</p> Signup and view all the answers

    Current liabilities on balance sheet?

    <p>Accounts payable</p> Signup and view all the answers

    Long-term liabilities on balance sheet?

    <p>Notes payable</p> Signup and view all the answers

    What goes under stockholders' equity on a balance sheet?

    <p>Common stock and retained earnings</p> Signup and view all the answers

    Study Notes

    Key Concepts in Accounting

    • Accounts Receivable: Considered assets; funds owed to a company by customers.
    • Long-Term Debt: Classified as liability; obligations due beyond one year.
    • Merchandise Inventory: Recognized as an asset; includes goods held for sale.
    • Prepaid Expenses: Treated as assets; payments made in advance for goods or services.
    • Accrued Expenses Payable: Defined as liabilities; expenses incurred but not yet paid.
    • Equipment: Categorized as assets; physical items used in business operations.
    • Notes Payable: Classified liabilities; written promises to pay specific amounts at future dates.
    • Retained Earnings: Represent stockholders' equity; accumulated profits not distributed as dividends.
    • Land: Considered an asset; physical property owned by a business.
    • Accounts Payable: Recognized liabilities; amounts a company owes to suppliers.

    Business Organization Types

    • Corporation, Limited-Liability Partnership (LLP), Limited-Liability Company (LLC): Organizations that limit owners’ risk of loss to amounts invested.
    • Proprietorship: Provides maximum freedom for management; owned by one individual.
    • Partnership: Offers increased protection for creditors, as multiple owners share liability.

    Financial Statements Overview

    • Balance Sheet: Lists accounts payable, inventory, long-term debt, cash, common stock, and retained earnings.
    • Income Statement: Reports revenue, expenses, and net income.
    • Statement of Cash Flows: Documents net cash used for financial activities, operating activities, and overall cash flow changes.

    Ethical Considerations in Accounting

    • Ethics: Essential in every business and accounting decision; considers potential economic and legal consequences.
    • Integrity in Decision-Making: Honesty and truthfulness should be prioritized.
    • Key Ethical Questions:
      • Is the action legal?
      • Who will be affected by the decision?
      • How will the decision affect my feelings afterwards?

    Fundamental Accounting Equations

    • Assets = Liabilities + Stockholders' Equity
    • Liabilities = Assets - Stockholders' Equity
    • Stockholders' Equity = Assets - Liabilities
    • Percent of Liabilities = (Liabilities / Assets) * 100

    Financial Statement Headings

    • Income Statement: Headed by company name, type of statement, period end date.
    • Statement of Retained Earnings: Similar heading structure as the income statement.
    • Balance Sheet: Follows a specific heading format including company name and date.

    Assets Classification

    • Current Assets: Include cash and accounts receivable.
    • Long-Term Assets: Comprise notes receivable and equipment.
    • Current Liabilities: Primarily consist of accounts payable.
    • Long-Term Liabilities: Typically involve notes payable.

    Stockholders' Equity Components

    • Common Stock: Represents ownership in the corporation.
    • Retained Earnings: Calculated by adding net income and subtracting dividends from the previous period.

    These study notes summarize essential accounting definitions, principles, ethical considerations, and classifications relevant to the foundational understanding of financial statements and business organization types.

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    Description

    This quiz covers essential accounting concepts including accounts receivable, long-term debt, merchandise inventory, and more. Test your knowledge on how different financial elements are classified in a business context. Ideal for students and professionals looking to solidify their foundational understanding of accounting.

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