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23 Cards in this Set
- Front
- Back
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ACCRUAL CONCEPT
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Transactions
Are recorded as they occur Are recorded even if cash not received or paid Affect accounting equation (A = L + E) It is designed to reflect a company's financial performance during a period and avoid misleading results that could arise from the timing of cash receipts and payments. |
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ACCRUAL
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Revenue recognized (recorded) when earned
Liabilities recognized when obligation incurred |
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MATCHING PRINCIPLE
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Expenses recognized, recorded in same period as related revenue
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MATCHING MEANS
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When revenue is recorded
Expenses incurred in generating revenues are Identified Recorded Matching subtracts expenses from revenue to determine net income or loss |
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ADJUSTMENT PROCESS
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Applies Matching Concept
Completes information necessary for balance sheet, income statement presentation |
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DEFERRALS
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Cash paid before expense incurred or cash received before revenue recognized
Examples: Prepaid expenses (insurance) Unearned revenues |
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ACCRUALS
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Recognize expense before cash is paid or recognize revenue before cash is received Examples:
Accrued expenses (interest expense) Accrued revenues (for services provided but not billed) |
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INTEGRATED FINANCIAL STATEMENTS
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Statement of cash flows linked to cash on balance sheet
Net income from income statement linked to retained earnings statement Retained earnings linked to balance sheet in stockholders’ equity |
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ACCRUAL ACCOUNTING
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Accrual accounting enhances interpretation
By following a standard set of rules (GAAP) for Recording Reporting Is a better predictor of long-term profitability |
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DEPRECIATION
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the reduction in the ability of a fixed asset to provide service
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BOOK VALUE/ CARRYING VALUE
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the cost of the fixed asset less the balance of its accumulated depreciation
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UNEARNED REVENUE
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revenue that has been paid in cash, but not yet earned
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PREPAID OR DEFERRED EXPENSES
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When a coverage such as insurance is expired with passage of time. At the end of the period the asset will have been used up and the policy will be completely expired
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ACCOUNTS PAYABLE
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liabilities that are incurred in the normal operations of the business
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ACCOUNTS RECIEVABLES
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revenue that is to be collected in the future and that arise from the normal operations of a business
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DEFERRED REVENUE
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items that initially have been recorded as liabilities but are expected to become revenues over time or through the normal operations of the business
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ACCRUED EXPENSES or ACCRUED LIABILITES
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are expenses that have been incurred but have not been recorded in the accounts
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ACCRUED REVENUES or ACCRUED ASSETS
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are revenues that have been earned but have not been recorded in the account
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CURRENT ASSETS
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cash and other assets that are expected to be converted to cash or sold or used up within 1 yr or less, through the normal operations of the business
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NOTE RECEIVABLE
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are written claims against debtors who promise to pay the amount of the note payable transaction
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LIABILITIES
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are amounts owed to outsiders(creditors). Its often associated with the word payable
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CURRENT LIABILITES
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liabilities that will be due within a short time, less than a yr usually and that to be paid out to current assets
ex. notes payable or accounts payable |
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LONG-TERM LIABILITIES
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liabilities that will not be due for a long time, usually more than 1 yr.
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