Intro. Accounting Chp.3 Test Review

Front 1

Revenue Recognition-
Pg.98 (bottom)

Back 1

Under accrual concepts of accounting, revenue is recognized when it is earned.

Front 2

Matching Concept-
Pg. 99

Back 2

Under the accrual concepts, the matching concept plays an important role in determining when expenses are recorded. When revenues are earned and recorded, all expenses incurred in generating the revenues must also be recorded, regardless of whether cash has been paid.

Front 3

Adjustment process-
Pg.105

Back 3

A process required by the accrual basis of accounting in which the accounts are updated prior to preparing financial statements.

Front 4

(Adjustment process)
Deferrals-
Pg.105

Back 4

When cash is paid or received, then a accounting period ends, and the cash is earned or incurred in a later accounting period. Created by recording a transaction in a way that delays or defers the recognition of an expense or a revenue. Include Prepaid expenses(deferred expenses) and unearned revenues(deferred revenues).

Front 5

(Adjustment process/Deferrals)
Prepaid expenses-
(deferred expenses)-

Back 5

Items that initially have been recorded as assets but are expected to become expenses over time or through the normal operations of the business. Ex: Prepaid insurance is a deferral that will normally require adjustment.

Front 6

Adjustment process/Deferrals)
Unearned revenues-
(deferred revenues)-

Back 6

Items that initially have been recorded as liabilities but are expected to become revenues over time. Ex: Unearned rent is a deferred revenue.

Front 7

(Adjustment process)
Accruals-
Pg.106

Back 7

Revenue or expense has been earned or incurred, then a accounting period ends, and the cash paid or received in a later accounting period. Created when a revenue or expense has been earned or incurred, but has not been recorded at the end of the accounting period. Includes accrued expenses(accrued liabilities) and accrued revenues(accrued assets).

Front 8

(Adjustment process/Accruals)
Accrued expenses-
(accrued liabilities)-

Back 8

Expenses that have been incurred but have not been recorded in the accounts. Ex: Accrued interest on notes payable at the end of a period.

Front 9

(Adjustment process/Accruals)
Accrued revenues-
(accrued assets)-

Back 9

Revenues that have been earned but have not been recorded in the accounts. Ex: Fees for services that an attorney has provided but has not billed to the client at the end of the period.

Front 10

Classified Balance Sheet
Pg. 113

Back 10

A balance sheet prepared with various sections, subsections, and captions that aid in its interpretation and analysis.