What is profit
The difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services.
What does GAAP stand for?
generally accepted accounting principles
What is GAAP
reports that allow investors and other users to compare one company to another
What is owner's equity
the owner's right to the assets of the business
What is cash basis accounting?
Record revenues when we receive cash and expenses at the time we pay cash
What is accrual basis accounting?
revenues and their related expenses are reported on the income statement in the period in which a service has been performed or a product has been delivered
What is unearned revenue?
Liability recorded when cash is received before providing a service.
Where on the balance sheet would you report a prepaid account
as assets
How do you calculate net income or net loss
Revenues - Expenses
What is the closing process
The transfer process of converting temporary account balances to zero by transferring the revenue and expense account balances to the owner's capital account, and transferring the owner's drawing account balance to the owner's capital account.
Where are to put Credit entries in the purchases journal
Accounts Payable
What is the periodic inventory system
only revenue is recorded each time a sale is madeNo entry is made at the time of the sale to record the cost of the merchandise sold.a physical inventory is taken to determine the cost of the inventory and the cost of the merchandise sold
What is the perpetual inventory system
The inventory system in which each purchase and sale of merchandise is recorded in an inventory account.
How do you calculate gross profit
Sales minus the cost of merchandise sold
How do you calculate the sales of merchandise on credit with credit terms
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What are two ways to account for uncollectible receivables
The direct write off methodallowance method
What is the formula for straight line depreciation
(cost - salvage or residual value) / useful life
What are the steps for depreciation by units of activity
1) Depreciation per hr= Cost-Residual/Total Estimated Units of Activity 2)Depreciation Expense= Depreciation per unit X Unit of activity for period
What are the steps to determine the annual depreciation by the straight line method
1)Annual Depreciation2)Straight line percentage= 100%/useful life3)Depreciation expense=cost-residual value X straight line percentage
What is the steps of determining the amount of depreciation using the double declining balance
1) Determine the straight-line percentage, using the expected useful life2)Determine the double-declining balance rate by multiplying the straight- line rate by 23)Compute the depreciation expense by multiplying the double-declining-balance rate times the book value of the asset