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...
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.)
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.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller twishfrancis. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R162,76. You're not tied to anything after your purchase.
