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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
  • Matching Principle - ___________ Recognizes expenses in the same period when they are incurred in generating revenues
  • Comparability - ___________ The quality that allows decision makers to analyze two or more companies within an industry and look for similarities and differences.
  • Consistency - ___________ The quality that means that similar accounting methods have been applied over time within a company.
  • Conservatism - ___________ 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:

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