Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
38 Cards in this Set
- Front
- Back
|
Time Period Assumption
|
Organization activities divided into specific time periods
month, quarter, year |
|
|
Reports covering a one-year period
|
Annual financial statements
|
|
|
Reports covering 1, 3, or 6 mo of activitiy
|
Interim financial statements
|
|
|
Period of time consisting of any 12 consecutive months
|
Fiscal year
|
|
|
Period of time covering seasonal variations in sales
|
Natural business year
|
|
|
Accrual basis accounting
def |
uses adjusting process to recognize revenues when earned and expenses when incurred
|
|
|
Cash basis accounting
def |
recognizes revenues when cash is received and records expenses when cash is paid
|
|
|
Accural based accounting better reflects....
|
business perfromance and increases the comparability of financial statements from one period to another
|
|
|
Recording Revenue early
|
Overstates current-period revenue and income
|
|
|
Recording Revenue late
|
Understates current-period revenue and income
|
|
|
Recording Expense early
|
Overstates current-period expenses
|
|
|
Recording Expense late
|
Understates current-period expenses
|
|
|
Matching Principle
def |
Record expenses in the same accounting period as the revenues that are earned as a result of those expenses
|
|
|
Adjustments are necessary for transactions and events that extend
|
Over more than one period
|
|
|
Adjustments - Left Side
Transactions when cash is paid or received before a related expense or revenue is recognized |
Prepaid Expenses (including depreciation) and
Unerned Revenue |
|
|
Adjustments - Right Side
Transactions when cash is paid or received after a related expense or revenue |
Accured expense
Accured revenue |
|
|
Prepaid =
|
Asset
|
|
|
Unearned =
|
Liability
|
|
|
Prepaid expenses
Asset |
Items paid for in advance of receiving their benefits
|
|
|
Prepaid Assets are used they become an....
|
Expense
|
|
|
Adjusting Prepaids
Increase... Decrease... |
Increase expense
Decrease assets |
|
|
Depreciation (prepaid asset)
def |
Allocating the costs of assets over their expected useful lives
|
|
|
Depreciation -
Asset's expected value at the end of it's useful life is called |
Salvage value
|
|
|
Depreciation Formula
|
Cost - Salvage Value
_____________________ Useful Life |
|
|
Contra Account
def |
Account linked with another account, it has opposite normal balance, and it is reported as a subtraction from that other account's balance
|
|
|
Book Value or Net amount
def |
= the asset's cost - accumulated depreciation
|
|
|
Unearned (Deferred) Revenues
def Liabilities |
Cash received in advance of providing products and services
|
|
|
Adjusting Unearned Revenues
Increase Decrease |
Increase Revenues
Decrease Unearned Revenues |
|
|
Accrued Expenses
def Liabilities |
Costs that are incurred in a period but are both unpaid and unrecorded
|
|
|
Adjusting Accrued Expenses
Increase Increase |
Increase Expense
Increase Libilities salaries, interest, rent, taxes |
|
|
Accrued Revenue
|
Revenues earned in a period that are both unrecorded and not yet received in cash (or other assets)
|
|
|
Adjusting Accrued Revenue
Increase Increase |
Increase Assets
Increse Revenue Services, products, interest, rent |
|
|
Process of adjusting accounts is intended to....
|
bring an asset or liability account balance to its correct amount
|
|
|
Prepaid Expense
Balance Sheet Income Statement Adj Entry |
Bal - Asset over/Equity over
Income - Expense under Adj - Dr Expense Cr Asset |
|
|
Unearned Revenues
Balance Sheet Income Statement Adj Entry |
Bal - Liab over/Equity under
Income - Revenue under Adj - Dr Liability Cr Revenue |
|
|
Accrued Expenses
Balance Sheet Income Statement Adj Entry |
Bal - Liab under/Equity over
Income - Expense under Adj - Dr Expense Cr Liability |
|
|
Accrued Revenues
Balance Sheet Income Statement Adj Entry |
Bal - Asset under/Equity under
Income - Revenue under Adj - Dr Asset Cr Revenue |
|
|
Adjusted Trial Balance
def |
List of accounts and balances prepared after adjusting entries have been recorded and posted to the ledger
|
