University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

213

Pages:

2
Author:

stud_ice13

Asset Accounts: • • • • • Cash: A company’s balance of available funds. Accounts receivable: Amounts owed to a seller by customers for sales made on credit. Notes receivable: A borrower’s written promise to pay a lender a specified amount in the future. Prepaid accounts: Prepaid expenses for future costs, such as insurance and rent. Other assets: Include supplies, equipment, buildings, and land. Liability Accounts: • • • • Accounts payable: A buyer's obligation to pay a seller for goods or services. Notes payable: A promissory note where a borrower commits to paying a future amount. Unearned revenue: Liabilities from receiving advance payments from customers before delivering goods or services. Accrued liabilities: Unpaid expenses that are already incurred, such as wages or taxes. Equity Accounts: • • • • Common stock: Represents owner investments, increasing both assets and equity. Dividends: Payments to shareholders, reducing both assets and equity. Revenue: Increases equity through sales of goods or services. Expenses: Costs that reduce equity by paying for business operations. Debits and Credits: • • • • Debit (Dr): The left side of an account. Credit (Cr): The right side of an account. Double-entry accounting: Requires at least one debit and one credit in every transaction. Debits must equal credits. Normal balances: Assets typically have a debit balance, while liabilities and equity have a credit balance. Recording Transactions: Key terms include: • • • General ledger: A record of all financial transactions. Journalizing: The process of recording transactions. T-account: A tool used to understand debits and credits. • Trial balance: A summary of all accounts ensuring debits equal credits. Financial Statements: Financial statements summarize a company’s financial performance and position, derived from accounting records. Multiple Choice Quiz: 1. Amalia's utility bill payment: Debit Utility Expense, credit Cash. 2. Ruby Lawn Service's advance payment: Debit Cash, credit Unearned Revenue. 3. Liang Shue's business contribution: Debit Cash and Land, credit Common Stock. 4. Trial balance error: Various possible causes for discrepancies in trial balances, such as misentries or incorrect recording. 5. Debt ratio: Calculation of debt ratio based on assets and liabilities.