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22 Cards in this Set

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  • Back
Explain the Time Period Principle
Time Period Principle States That Accounting Activities Can be Divided Into Time Periods
Explain Annual and Interim Financial Statements
Annual Statements Cover a 1 Year Period, Interim Statements Cover Shorter Periods of Time
What is a Fiscal Year?
Any 12 Consecutive Months
What Companies Choose a Natural Business Cycle End and When it End?
Companies that have Seasonal Variations May Choose a Natural Business Cycle and it Ends at the Lowest Point of Activity During Their Cycle
What is Accrual Basis Accounting?
Accrual Accounting Records Revenues When Earned and Expenses When Incurred Regardless of Whether or Not Money has been Exchanged
State the Matching Principle
The Matching Principle States that Expenses Will be Matched with the Revenues that Created Them in the Same Accounting Cycle
When are Accruals Recognized?
Accruals are Revenue and Expense Transactions that are Recorded Before Money Has Been Exchanged
What are Deferrals and When are They Recognized?
Deferrals are Revenue and Expense Transactions that are Recorded After Money Has Been Exchanged
What are Allocations?
When Defferals are Spread Over More than One Accounting Periods in Equal Amounts, They are Called Allocations
What Accounts Would we Debit and Credit to Accrue Salary Expense?
Salary Expense - Debit
Salary Payable - Credit
To Accrue Salary Expense.
When we Pay Salary Expense that Was Accrued in the Last Cycle, What Accounts Will We Debit and Credit?
Salary Payable - Debit
Salary Expense Debit

Cash - Credit
To record salary expense including accrued salary expense.
Towards the End of the Year we Enter into a Contract to Perform Services. What is the Journal Entry to Accrue Revenue?
Accounts Recievable - Debit Service Revenue - Credit
To record accrued revenue.
Give Journal Entry to Record Receipt of Revenue that was Accrued in the Last Cycle
Cash - Debit
Accounts Receivable - Credit Revenue - Credit

To record cash receipt of accrued asset and revenue earned.
Record a Journal Entry for $100 of Prepaid Insurance that has Expired at the End of the Accounting Period
Insurance Expns $ 100-Debit
Prepaid Insurance $100 -Credit
To record expired prepaid insurance.
If the Cost of a Plant Asset- Equipment is $375 Per Month, What is the Journal Entry to Record 1 Months Depreciation?
Depr. Expense $375-Debit
Accum. Dep.-Equp $375-Credit
To record monthly equip. depreciation.
What is Depreciation?
The Process of Allocating the Cost of Plant Assets Over their Expected Useful Life
We Purchase Equipment for $26,000. The Equipment's Expected Useful Life is 4 Years and Will be Worth $8,000 at that Time. Using Straight-Line Depr. What Would be the Monthly Cost of the Asset?
$26,000 Cost - $8,000 Net Worth = $18,000 Net Cost

$18,000Net Cost/36 Months = $375
What Kind of Account is Accumulated Depreciation?
A Contra Asset Account to a Plant Asset
What are Contra Accounts?
The have an Opposite Normal Balance of their Master Account. The Highlight the True Value of the Master Account
How do You Find Book Value?
Cost of Asset - Accumulated Depriciation
Once we have Created our Adjusted Trial Balance, What Info Moves from here to Which Financial Reports?
Revenue and Expenses Move to the Income Statement
Withdrawals Moves to the Statement of Owner's Equity
Assets and Liabilities Move to the Balance Sheet
What is the Formual for Profit Margin and What Does it Tell us about Operations?
Profit Margin = Net Income/Net Sales

It give a % of Profit for each $ of Sales. It Measures a Company's Operating Results, it Shows Return on Sales