Financial accounting

19 flashcards · Other · by Daniel F.

1. Income statement

   revenue - expenses = income before taxes gross income - income tax = net income

2. Statement of retained earnings

   starting balance + net income -(less) dividends = retained earnings

3. Balance Sheet

   A = L + SE

4. Net income in the balance sheet

   Net income = Change in SE - investments + dividends

5. Trial balance

   Check if balance sheet is in balance

6. Adjusting entry - Deferral

   The postponement of the recognition of an expense already paid or of revenue received in advance

7. Adjusting entry - Accrual

   The recognition of a revenue or expense that has arisen but not been recorded during the accounting period

8. Adjusting entries - Basic techniques

   Include one balance sheet acc and one income statement acc never touch cash

9. Temporary Accounts

   Income statement It has to be closed at the end of the period with income summary

10. Multi step income statement

    Sales revenue (+ fright in) > Net sales Cost of goods sold > Gross profit Operating Expenses > Income from operations Non-Operating Expenses > Net income

11. Closing statements

    Temporary income summary account Close the revenue accounts > Revenue on the debit side Close the expense accounts > Expense(s) on the credit side Close income summary > put it into retained earnings Close dividends accounts > pay out dividends, dividends on the credit side

12. Adjusting entries - Depreciation

    Depreciation Expense @ Accumulated Depreciation

13. Return on assets

    net income / average total assets profit margin * asset turnover Profit margin = net income / net revenues Asset turnover = net revenues / average total assets Average total assets can be calculated by adding the prior period's ending total assets to the current period's ending total assets and dividing the result by two.

14. FOB shipping point

    Buyer pays shipping

15. FOB destination

    Seller pays shipping

16. Periodic inventory system

    1 entry per change in inventory, merchandise inventory gets adjusted at the end of the period All sales go into the Sales (revenue) account All purchases go into the Purchases (expense) account Sales return and allowances and Purchase return allowances are the contra accounts for returns Adjusting entries at the end of the month:

17. Perpetual inventory system

    1 entry for purchases, 2 entries for sales, updated immediately Purchases effect merchandise inventory as they happen Sales go into the Sales (revenue) account and cost of goods sold (expense) is debited from Merchandise inventory Sales return is also 2 entries

18. Ending Inventory costing methods

    Specific identification Everything at its own value Average cost cost of ending inventory / ending inventory amount FIFO First item bought sets the value LIFO Last item bought sets the value

19. COGS

    Periodic system: COGS = BEGIN + PURCHASES – END Perpetual system: END = BEGIN + PURCHASES – COGS Begin + purchases: cost available for sale