ARBC 106b Study Guide - Final Guide: Retained Earnings, Net Income, Common Stock
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Accounting Final Exam Review
Chapter 1: A Framework for Financial Accounting
Assets = liabilities + Owner’s Equity
Net Income = Revenue – Expenses → Income Statement
Stock Equity = Common Stock + Retained Earnings
Retained Earnings = Net Income – Dividends
Change in Stockholder’s Equity = issuance common stock + Net Income – Dividends
Total Change in Cash = Operating + Investing + Financing
Assets = liabilities + common stock + retained earnings
A companies RE increased by $50,000 and gave away $30,000 in dividends. What was their
- $50,000 = x – $30,000
- x = $80,000
Assets = $50,000 and liabilities = $10,000. What was equity?
- $50,000 = $10,000 + x
- Equity = $40,000
Chapter 2: The Accounting Cycle: During the Period
Sells shares of common stock for $25,000 to obtain the funds necessary to start the business.
Which is one account affected by the transaction?
Does that account increase or decrease?
- Increase by $25,000
What OTHER account affected by the transaction?
- Common stock → LOOK AT CHART -→ credit common stock → Increases it
Which of the following is used to provide a chronological record of all transactions affecting a
- The journal
What effect does the payment of dividends have on the accounting equation? ***
- Assets decrease and equity decreases
Questions to review in Connect: CMQ, Q2, Attempt 1, Stockholder’s equity chart
Chapter 3: The Accounting Cycle: End of the Period
Accrual-basis vs cash-basis accounting
Accrual-basis – matching revenue and expenses in the right time period → as we have incurred it
Cash-basis – when you receive or pay out cash
For each transaction below, calculate the amount of revenue to be recognized in the current
period using accrual-basis accounting:
a. Performed $28,000 of services during the month and received full cash payment from
customers at the time of service
- Revenue to be recognized $28,000
b. Performed $9,000 of services during the month and billed customers. Customers are
expected to pay next month.
- Revenue to be recognized $9,000
c. Received $19,000 cash from customers for services to be provided next month
- Revenue to be recognized $0
A company lends $60,000 with 9% interest on May 1, 2018. This amount plus interest is due on
April 30, 2019. Record the adjusting entry on December 31, 2018.
- Debit Interest receivable 3600
- Credit Interest revenue 3600
Post-Closing Trial Balance
- Lists all PERMANENT account balances after updating for closing entries
- Helps verify that closing entries were prepared and posted correctly and that the
accounts are now ready for the next period’s transactions
Typical Post-Closing Trial Balance