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17 Cards in this Set
- Front
- Back
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What is the purpose of financial accounting?
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measure business activities
communicate them to investors/creditors to make decisions |
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what does the income statement show?
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a companys revenues/expenses over time
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What is net income?
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revenue-expenses
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What is revenue?
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amounts earned from products/services
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What does the balance sheet show?
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A company's financial position
a=l+se |
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What are dividends?
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not expenses -- sharing of net income with owners (stockholders)
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What affect do dividends have on the accounting equation?
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a=-200 cash down
se=-200 dividends up |
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How does accounts recieveable affects assets?
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Increases them -- rev. rec. principle states that we record the revenue in the period we earn it
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what is the revenue recognition principle?
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we record revenue in the period in which we earn it (provide services)
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what is the matching principle?
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recognize expenses in the same period as the revenues that they help generate
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What is cash basis accounting?
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we record revenues at the same time we receive cash/we record expenses at the same time we pay cash (contradicts rev. rec. rule therefore not used here)
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What is accrual basis accounting?
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record revenues when earned/record expenses when incurred
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What do adjusting entries do?
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record events that have occured but that we have not yet recorded
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Why do we use adjusting entries?
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because it helps follow the rev. rec/matching principle. its a practical way to record insurance, etc.
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What do closing entries do?
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transfer net income to retained earnings
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How do we record accounts recieveable in the balance sheet?
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accr debit 30
minus 9 for uncollectible accts = net acc. rec = 21 |
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Why choose LIFO?
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Save on taxes
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