Accounting Exam 1
normal bal the total ance of accounts
Type of net balance that it should have, the difference between the total of debits and total of credits
Debits
Records of money coming in or an increase in assets or expenses
Credits
Records of money going out or an increase in equity
Accounting equation
Assets= Liabilities + Equity
Calculate Net Income
revenue-expenses
Calculate Equity
Assets - Liabilities
Calculate net cost
Total expenses-Total Revenue
Cash and Cash Equivalent
the line item on the balance sheet that reports the value of a companys assets that are cash or can be converted into cash immediatley
Sarbanes-Oxley Act
law to protect investors and the public from accounting fraud and corporate mismangament
Seperation of duties
internal control that divides tasks among multiple people.
what can circumvent great internal controls
collusion and management
Bank reconciliation
helps ensure your financial records are accurate
find matching balances, compare transactions, adjust balances, add and deduct items, compare again, prepare journal entry
Change in stockholders equity equation
change in stockholders equity= issue common stock + net income - dividends
total change in cash equation
total change in cash= operating cash flows + investing cash flows + financing cash flows
Calculate retained earnings
net income - dividends
Balance sheet
cash, commonstock, accounts payable, equipment, supplies, salaries payable
Income statement
service revenue, salaries expense, advertising expense, insurance expense
assets
cash, equipment, supplies
stockholders equity
common stock
revenue
service revenue
expenses
salaries expense, advertising expense, insurance expense
liability
accounts payable, salaries payable
is the company profitable
if its total revenue exceeds its total expenses
why do we do closing entries
to ensure a companys finacial statements are accurate and to prepare for the next period
what accounts do we close
revenue accounts, expense accounts, income summary, dividends