76 terms

Accounting Final


Terms in this set (...)

permanent accounts
not closed; roll over to next period; all assets, liabilities, contributed capital, and retained earnings (balance sheet)
temporary accounts
closed; accounts that only matter for that period; revenues, expenses, and dividends declared; closed to retained earnings (income statement)
not closed, debit, balance sheet
not closed, credit, balance sheet
retained earnings/contributed capital
not closed, credit, balance sheet AND statement of stockholders' equity
closed, credit, income statement
deferred revenue
not closed, credit, balance sheet
closed, credit, income statement
prepaid expenses
not closed, debit, balance sheet
deferred taxes
an asset/liability; when the company has paid more/less in taxes to the IRS than it has actually recognized on the income statement
a non-current asset; purchase price of company - fair market value of company
additional paid-in capital
contributed capital - par value
accumulated other comprehensive income/loss (AOCI/L)
cumulative income/losses, usually generated from investments
assets, expenses
liabilities, equity, revenue
first journal entry for a sale
debit cash and credit sales revenue for the price the customer paid
second journal entry for a sale
debit cost of goods sold and credit inventory for the inventory value (calculated by LIFO, FIFO, weighted average, etc.)
bad debt journal entry
debit bad debt expense and credit ADA
write-off journal entry
debit ADA and credit accounts receivable
examples of contra-assets
accumulated depreciation, allowance for doubtful accounts
prepaid asset journal entry
debit prepaid asset and credit cash, then debit prepaid expense and credit prepaid asset
accrued expenses (like dividends) journal entry
debit accrued expense and credit expense payable, then debit expense payable and credit cash
unearned revenue journal entry
debit cash and credit unearned revenue, then debit unearned revenue and credit revenue
which accounts close out to retained earnings?
revenue (increases RE), dividends and expenses (decrease RE)
accrual accounting
revenue can only be recognized if the service was rendered or the goods were delivered
unearned revenue
a current liability b/c the company still owes the customer a good or service
2/10, n/30
if the customer pays within 10 days, they receive a 2% discount, but full payment is due in 30 days no matter what
net sales
sales revenue - discounts - returns and allowances
two methods for bad debt expense
percentage of sales and aging of receivables
accounts receivable (t-account)
BB + sales revenue - write offs - cash collected = EB
allowance for doubtful accounts (t-account)
BB + bad debt expense - write offs = EB
inventory (t-account)
BB + purchases - COGS = EB
accounts payable (t-account)
BB + purchases (from inventory) - payment to suppliers = EB
COGS is most recently purchased inventory, ending inventory is oldest inventory
ending inventory is most recently purchased inventory, COGS is oldest inventory
weighted average
COGS = number of units sold x (total cost of units available for sale/total number of units available for sale)
why do deferred taxes occur?
b/c GAAP (income tax expense) and the IRS (income tax liability) calculate them differently, so they do not always match up
deferred tax asset
income tax payable - income tax expense
deferred tax liability
income tax expense - income tax payable
income tax expense
tax rate * GAAP net income (on the income statement)
income tax liability
tax rate * IRS net income (actual amount of taxes paid)
depreciation method for book purposes
usually straight line
depreciation method for taxes
usually double declining balance (DDB)
two parts of bonds
principal and interest payments
lump sum paid at the end
interest payments
installments paid at the end of each period
PV of all expected future cash flows
PV of lump sum + PV of annuities
coupon rate < market rate; PV of bond < maturity value of bond; interest expense > cash paid
coupon rate > market rate; PV of bond > maturity vale of bond; interest expense < cash paid
coupon payment
face value x coupon rate
discount on bonds payable
debit and contra-liability; added to cash received to obtain bonds payable
premium on bonds payable
credit and liability; added to bonds payable to obtain cash received
discount on bonds payable (periodical)
interest expense - cash
premium on bonds payable (periodical)
cash - interest expense
zero coupon bonds
lump sum is only part; no interest actually paid but expense still recognized
debit for a discount, credit for a premium
trading or available-for-sale securities (Fair Value Method)
significant influence
investment in affiliate (Equity Method)
preferred stock
has special rights over common stock (namely first in line for liquidation behind debt holders) but does not have ability to vote
stock issue (journal entry)
debit cash and credit both common/preferred stock (at par value) and APIC
treasury stock
contra-equity; when a company buys back its own stock
reissuing treasury stock (journal entry)
debit cash, credit treasury stock, and debit (sold back at lower price) or credit (sold back at higher price) APIC
dividends declared (journal entry)
debit retained earnings and credit dividends payable
dividends paid (journal entry)
debit dividends payable and credit cash
stock dividend declared (journal entry)
debit retained earnings and credit common stock dividend distributable (and APIC if small dividend)
stock dividend distributed (journal entry)
debit common stock dividend distributable and credit common stock
stock split effects
number of shares will double and market price per share/par value will be halved
beg inventory + purchases - purchase discount + transportation in - end inv
FIFO inventory
LIFO inventory + LIFO reserve
LIFO COGS - LIFO reserve
net realizable value
beg A/R + write offs - allowance balance
allowance balance
percentage of sales or aging of receivables
book value
historical cost - accumulated depreciation; also called carrying value
salvage value
price a company expects to sell the asset for at the end of its useful life; also called residual value
depreciable value
historical cost - salvage value
fair value
current value at which the asset could potentially be sold; also called market value