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29 Cards in this Set
- Front
- Back
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What is an annual financial statement? |
Reports covering a one-year period |
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What are interim financial statements? |
Reports covering 1, 3, or 6 months of activity |
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What is a natural business year? |
A business year that ends when sale activities are at their lowest level for the year |
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What is a fiscal year? |
Any 12 consecutive months |
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What is the accrual accounting basis? |
An accounting method that uses the adjusting process to recognize revenues when earned and expenses when incurred |
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What is cash basis accounting? |
An accounting system that recognizes revenues when cash is received and record the expenses when cash is paid , and is not consistent with GAAP |
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What is an adjusting entry? |
Entries that are made at the end of the accounting period to reflect a transaction or event that is not yet recorded |
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What are deferrals? |
Deferrals reflect transactions when cash is paid or received before a related expense or revenue is recognized |
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What are accruals? |
Accrued expenses refer to the cost that are incurred in a period but are both unpaid and unrecorded |
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List some deferrals: |
Prepaid expenses, supplies, depreciation, and unearned Revenue |
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List some accruals: |
Salary expenses, interest expense, and accrued revenues |
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What are deferred revenues? |
Unearned revenues that have now been partially or completely earned and now need to be adjusted |
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What is the simple interest formula? |
Interest= Principal amount × Annual interest rate × Time |
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What are accrued revenues? |
Revenues that are earned in a period of time and are both unrecorded an unpaid. |
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What is an unadjusted trial balance? |
A list of accounts and balances prepared before adjustments are recorded |
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What is the closing process? |
An important step at the end of an accounting period after financial statements have been completed |
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What is the income summary? |
A temporary account only used in the closing process |
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What are the four steps in the closing process? |
1. Close income statement credit balances / revenues 2. Close income statement debit balances / expenses 3. Close income summary account 4. Close dividends account |
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What is the post-closing trial balance? |
A list of permanent accounts and their balances from The Ledger after all closing entries have been journalized and posted |
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What is the accounting cycle? |
It refers to the steps in preparing financial statements and is called a cycle because the steps are repeated each reporting period. |
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What is a classified balance sheet? |
A balance sheet that organizes assets and liabilities into important subgroups that provides more information to decision-makers |
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What is the operating cycle? |
The time span from when cash is used to acquire goods and services until cash is received from the sale of goods and services |
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What are current assets? |
Cash and other resources that are expected to be sold, collected, or used within one year , or the company's operating cycle , whichever is longer |
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What are long-term Investments? |
Assets that are expected to be held for more than the longer of one year or the operating cycle |
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What are plant assets? |
Tangible assets that are both long-lived and used to produce or sell products and services |
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What are intangible assets? |
Long-term resources that benefit business operations, usually lack physical form, and have uncertain benefits |
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What are current liabilities? |
Obligations due to be paid or settled within one year or the operating cycle, whichever is longer |
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What are long-term liabilities? |
Obligations not do within one year or the operating cycle, whichever is longer |
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What are adjusting journal entries? |
AJE's allow us to get the books ready for the creation of the financial statements by helping us to ensure that all the activity related to the period in question has been updated and accounted for. |
