Matching Basic Vocabulary Topic 1

Match the following accounting principles, accounting assumptions, and qualitative characteristics with their descriptions.

  1. Separate Entity Assumption
  2. Unit of Measure Assumption
  3. Conservatism
  4. Comparability
  5. Consistency
  6. Materiality
  7. Relevance
  8. Reliability
  9. Matching Principle
  10. Historical Cost Principle
  11. Time Period Assumption
  • ___________ Recognizes expenses in the same period when they are incurred in generating revenues
  • ___________ The quality that allows decision makers to analyze two or more companies within an industry and look for similarities and differences.
  • ___________ The quality that means that similar accounting methods have been applied over time within a company.
  • ___________ The guideline that suggests accountants should take special care to not overstate revenues.

Account Classifications Topic 1

For each account listed below, choose its classification:

Account Classification
1 Accounts Payable
2 Accounts Receivable
3 Advertising Expense
4 Bonds Payable
5 Building
6 Capital Stock
7 Cash
8 Common Stock
9 Cost of Goods Sold
10 Depreciation Expense
11 Dividends
12 Service Fees Earned
13 Income Tax Expense
14 Interest Expense
15 Interest Payable
16 Interest Revenue
17 Inventory
18 Investments
19 Land
20 Notes Payable
21 Notes Receivable
22 Preferred Stock
23 Prepaid Advertising
24 Prepaid Insurance
25 Prepaid Rent
26 Rent Expense
27 Retained Earnings
28 Salaries Payable
29 Sales Revenue
30 Service Revenue
31 Supplies
32 Unearned Revenue
33 Utilities Payable
34 Wages Expense

Solving for Net Income Topic 1

December 31 Total Assets Total Liabilities
Year 1 135,000 88,000
Year 2 177,000 92,000

Determine Net Income (or Loss) for Year 2 assuming that dividends paid during the year amounted to $3,000.

Tying the Statements Together Topic 1

A company had the following account balances at the end of its first year of operations. Find the missing amounts.

Net Income 560 Common Stock 1,600
Accounts Payable 500 Retained Earnings 550
Inventory ? Revenue ?
Equipment 1,200 Expenses 1,760
Accounts receivable 700 Cash 1,000
Dividends ? Wages Payable 900
  1. Determine Inventory
  2. Determine Revenue
  3. Determine Dividends

Solving for Retained Earnings Topic 1

At the end of Year 2, a company has a retained earnings balance of 5,700. Compute the missing amounts in the following table.

Year 1 Year 2
Beginning retained earnings 4,500 A
Revenues for the year 16,300 15,200
Expenses for the year B 13,300
Dividends declared 1,000 1,500
(B) Year 1 Expenses (A) Year 2 Beginning retained earnings
1. 13,700 2,300
2. 14,500 5,300
3. 17,500 5,700
4. 19,500 6,100
5. None of the above