1What are accrued revenues?
2Common stock
Total amount paid in by stockholders for the shares they purchase
3In the event of financial difficulty, _______________ claims must be paid before stockholder's claims.
Creditor's claims
4Liabilities
Amounts owed to creditors (in the form of debt or other obligations)
5Types of liabilities
Note payable - money borrowed for delivery truck; Bonds payable - have to be paid by a particular date some years in the future
6Dividends
Cash payments made to stockholders
7Liabilities, common stock, and dividends fall under ________ activity
Financing activity
8Resources owned by a business are called
Assets
9Different types of assets
- Cash; - Property, plant, equipment; - Investments in other corporations; - Supplies; - Accounts receivable; - Inventory; - Land
10Revenue
The increase in assets or the decrease in liabilities resulting from the sale of goods or the performance of services
11Types of revenue
Sales revenue, service revenue, interest revenue
12Assets with shorter lives come from
Operating activities (e.g., supplies)
13Longer lived assets are purchased through
Investing activities
14Goods available for future sales to customers are assets called
Inventory
15Expenses
The cost of assets consumed or services used in the process of generating revenue
16Types of expenses
Costs of goods sold; Selling expenses (salesperson salaries); Marketing expenses; Administrative expenses; Interest expenses; Income taxes; Utilities
17Net income
When revenue exceeds expenses
18Net loss
When expenses exceed revenue
19To show how successfully your business performed during a period of time, you report its _____________ and ____________ in an income statement.
Revenues and expenses
20Balance sheet
Used to present a picture at a point in time of what your business owns (its assets) and what it owes (its liabilities); Reports assets and claims to assets at a specific time
21Stockholder's equity
The owner's claim to assets
22Liabilities
The creditor's claim to assets
23On October 1, cash of 10,000 is invested in the business by investors in exchange for 10,000 of common stock. What effect would this transaction have on the financial statements?
Cash would increase 10,000, stockholder's equity is increased 10,000
24Sierra borrows 5,000 from Castle Bank by signing a 3 month, 12%, 5,000 notes payable. What effect would this transaction have on the financial statements?
Asset Cash and liabilities both increase 5,000
25On October 2nd Sierra purchased equipment by paying 5,000 cash to Superior Equipment Sales Co. What effect would this transaction have on the financial statements?
Asset cash decreases 5,000 and asset Equipment increases 5,000
26On October 2, Sierra received a 1,200 dollar cash advance from a client. What effect would this transaction have on the financial statements?
Cash Assets would increase 1,200, Liability Unearned Service Revenue increases 1,200
27Sierra received $10,000 cash from Copa Company for services. What effect would this transaction have on the financial statements?
Asset Cash increases $10,000, Revenue Increases $10,000
The revenue is changed in the Income Statement because the service has been performed
28Sierra paid for rent for the month of October in Cash, $900. What effect would this transaction have on the financial statements?
Asset cash decreases $900 and decrease of $900 in stockholder's equity
Expenses increase
29Sierra paid $600 for a one year insurance policy that will expire next year. What effect would this transaction have on the financial statements?
Asset Cash would decrease $600 and Asset Prepaid Insurance would increase $600
30Sierra pays for 3 months of supplies on account for $2,500. What effect would this transaction have on the financial statements?
Asset supplies increases $2,500, Accounts payable increases $2,500
31Accrued Revenues
Revenue we earn when providing service now, but allowing customers to pay later
32Accrued Expenses
Expenses that are incurred before cash is paid