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ACG 2021 Exam 1 Review (Chapters 1-3) Questions and Correct Answers
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Income Statement Formula: Revenues - Expenses = Net Income Statement of Stockholder's Equity Formulas: Common Stock Equation: Beginning Common Stock + Issuance of New Common Stock = End Balance of Common Stock (Beg. C.S. + Issuance = End. C.S.) Retained Earnings Equation: Beginning Retained Earni...

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  • August 11, 2024
  • 13
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • acg 2021 exam 1 review chapters 1 3 questions an
  • income statement formula revenues expenses n
  • statement of stockholders equity formulas commo

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  • ACG 2021
  • ACG 2021

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ACG 2021 Exam 1 Review (Chapters 1-
3) Questions and Correct Answers
Income Statement Formula: ✅Revenues - Expenses = Net Income

Statement of Stockholder's Equity Formulas: ✅Common Stock Equation: Beginning
Common Stock + Issuance of New Common Stock = End Balance of Common Stock
(Beg. C.S. + Issuance = End. C.S.)

Retained Earnings Equation: Beginning Retained Earnings + Net Income - Dividends =
End Balance of Retained Earnings. (Beg. R.E. + N.I. - Div. = End. R.E.)

Balance Sheet Formula: ✅Assets = Liabilities + Stockholder's Equity

Order of Financial Statements: ✅1. Income Statement
2. Statement of Stockholder's Equity
3. Balance Sheet
4. Statement of Cash Flows

Statement of Cash Flows: ✅1. Operating Cash Flows,
2. Investing Cash Flows, and
3. Financing Cash Flows.

* need to know ending balance from balance sheet before preparing the statement of
cash flows*

True/False: If there is a net loss, you still record the net loss on the statement of
stockholders' equity and income statement. ✅True

What is net loss? ✅More expenses and less revenues.

Accounting Equation: Debit and Credit Rules ✅Assets = Liabilities + Stockholders
Equity

Create T-Accounts for each of the three accounts
Debit on the left, Credit on the Right.

Accounting Equation: Debit and Credit Rules (Assets) ✅D.r. Increases
C.r. Decreases

Accounting Equation: Debit and Credit Rules (Liabilities) ✅D.r. Decreases
C.r. Increases

, Accounting Equation: Debit and Credit Rules (Stockholders' Equity) ✅D.r. Decreases
C.r. Increases

D.r.: ✅Debit

C.r.: ✅Credit

Accounting Equation: Debit and Credit Rules (Stockholders' Equity) cont. ✅R.E.:
Revenues - Expenses - Dividends

Rev: D.r. decreases, C.r. increases

Expenses: D.r. increases, C.r. decreases

Dividends: D.r. increases, C.r. decreases

C.S.: D.r. decreases, C.r. increases

True/False: The more dividends you have, the less retained earnings you have. ✅True

Dividends: ✅Not an expense; a distribution to owners; follows the same rules as
expenses in the accounting equation.

When a company performs a service on account for a customer, which of the following
would occur?

a. Expenses would decrease
b. Assets would decreases
c. Net income would decrease
d. Stockholders' equity would increase ✅Answer: D

Explain: When we perform a service on account, we have more service revenue
(increase in service revenue and an increase in accounts receivable). Accounts
receivable is an asset.

When we perform a service account, we don't actually get the money, but we have the
right to receive money.

The more service revenue, the more equity we have.

Normal Balance: ✅What is done to increase the balance of an account?

Example: Assets increases with a debit, so assets normal balance is debit.

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