ACC201_StudyGuide.docVIP

ACC201 … STUDY GUIDE for TEST ONE (Chapters 1, 2, 3) Test #1 will consist of 50-60 of the questions below. (Finding the “answers” to these questions is part of the review) True or False Owners equity represents the amount of assets that can be claimed by creditors. The right-hand side of an account is always the increase side. A ledger is a chronological record of a business’s transactions. The chart of accounts proves that all transactions were correctly journalized and posted. In accrual-basis of accounting, revenues are recorded when a service is performed. Current liabilities are expected to be paid off or eliminated in the next 12 months. Each time a business records revenue the account Cash is increased. Accumulated depreciation of an asset – its depreciation expense = book value. Financial accounting provides information for people inside the company while managerial accounting focuses on information for people outside the company. Every adjusting entry affects one account on the income statement and one account on the balance sheet. Financial statements will be inaccurate if they are prepared before the adjusting entries are completed. The “current ratio” is calculated by dividing the Total Assets by Total Liabilities. During the closing process, ALL revenue and expense accounts are closed. “Liquidity” is a measure of how quickly an asset can be converted into cash. Revenues and expenses are also classified as “current” or “long-term” on a classified Income Statement. Cash-basis accounting results in a more accurate measurement of net income than does the accrual basis of accounting. Financial statements will be inaccurate if they are prepared before the adjusting entries are completed. Risk is the amount of uncertainty about the return we expect to earn in the future.? Accounting records are also referred to as the books. ?Source documents provide evidence of business t