Review for Mid-term ACCT 501-101 Fall 2015.docx - Review...

Review for Midterm Exam_ACCT 101
Strategy:
If it is a problem-solving type of question, and it looks long, read the question first.
A Summary of Review:
Debits/Credits rule
Assets (and what is the common characteristic of assets)
Accounts receivable
Accounts payable (calculation of Accounts payable,
-e.g. Purchases on account—increases accounts payable
Make payments on account-decreases accounts payable )
The usefulness and limitation of a trial balance
Result of a transaction (e.g. Will assets increase or liability increase, or no change after a
transaction)
Use of basic accounting equation (Assets = Lib +O. E)
Normal balance (e.g. Cash has normal debit balance, Accounts payable has normal credit
balance, expense has a normal debit balance)
Revenue recognition principle (When to record revenue? –Answer: when it is earned,
regardless of whether cash is collected or not—that is, when you performed the service or
sold the goods to the customer rather than when cash is received).
e.g. for revenue that we have earned (i.e. we already performed the service or
delivered the goods) but we have not received any cash, we still need to record the
revenue we have earned, the way we record this is: debit accounts receivable and credit
sales/service revenue:
Accounts Receivable XXX
Service Revenue XXX
Matching principle

receive the goods or services even when the cash has not been paid). The way we record