Accounting Ch 3: Terms/principles

Front 1

Revenues - Expenses = ?

Back 1

Net Income. Net Loss occurs when Expenses are more than Revenues.

Front 2

Income Sheets contain:
1. At "date" or For the month of...

2. What accounts?

Back 2

1. For the Month Ended..
2. Revenues, Expenses, Net Income

Front 3

Revenues: (define and explain)
Expenses: (define and explain)

Back 3

Increase company resources via sales of goods/services.

Costs necessary to earn revenues

Front 4

Cash Basis Accounting:
1.means revenues/expenses are recorded when?
2. Does is measure financial performance well with credit instead of cash?

Back 4

1. Revenues are recorded when CASH is RECEIVED and Expenses are recorded when CASH is PAID.
2. No!

Front 5

Accrual Basis Accounting

Back 5

Records REVENUES when EARNED.
Records when EXPENSES are INCURRED regardless of timing of cash receipts/payments.
Earned: when goods/services are provided.
Incurred: when USED up in CURRENT period resulting in DECREASE of RESOURCES

Front 6

Revenue Principle

Matching Principle

Back 6

Revenue Principle: Revenues should be RECORDED when EARNED instead of when cash is received.

Matching: Expenses recorded when INCURRED to generate revenue instead of when they are paid.

Front 7

Unearned Revenue: Asset, Lib, SE?
Define

Back 7

Liability.
Occurs when cash is received before service.
+cash, +Lib

Front 8

Cash is received AFTER a service...
+ and - where BEFORE AND AFTER

Back 8

+Revenue, + Accts Receivable (A)

Once Cash is received:
+Cash (A), -Accts Receivable (A)