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Review Homework

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Account Characteristics Review

Type of account: Asset $($A$),$ Contra$-$asset $($CA$),$ Liability $($L$),$ Owners Equity $($OE$),$ Revenue $($R$),$ Expense $($E$)$

Financial Statement: Income Statement $($IS$),$ Statement of Owners Equity $($SOE$),$ Balance Sheet $($BS$)$

Inventory Methods Review $($insert $"$X$"$ in correct column$)$

Perpetual

Periodic

Both

Cost of Goods Sold Account exists in ledger

Cost of Goods Sold is calculated

Two entries to record the sale of merchandise

Inventory is debited when merchandise is purchased

Gross Profit $=$ Net Sales $-$ Cost of Goods Sold

Purchases is debited when merchandise is purchased

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Double Declining

Units of

Depreciation Methods Review $($insert $"$X$"$ in correct column$)$

Straight$-$Line

Balance Production

An accelerated method

Requires the ability to count production

Equal amount of depreciation expense each period

Easiest method

Best matches depreciation expense to asset production

Accounting GAAP Principles Review $-$ Match the number to the definition

Historical Cost

Matching

Objectivity

Conservatism

Full Disclosure

Consistency

Revenue Recognition

Materiality

Economic Entity

Time Period

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The business is separate and distinct from its owner and from other entities.

The life of a business is broken into measurable time periods for reporting purposes.

The recording of accounting transactions shall be at historical cost.

Accounting information shall be verifiable $($traceable to source documents$).$

The recording of revenue shall be at the point when it is earned.

Match revenues and expenses to the period when it is earned or incurred.

Strict adherence to accounting principles is not required for insignificant amounts.

Any material pertinent information should be fully disclosed.

The application of accounting methods & procedures should be on a consistent basis. Encourages understatement rather than overstatement.

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