-
Type of accounting that involves recording revenue when cash is received from customers and recording expenses when cash is paid.
Cash-basis accounting
-
Type of accounting that involves recording revenue when earned and recording expenses in the period in which they are incurred.
Accrual-basis accounting
-
Which type of accounting is required by GAAP?
Accrual-basis
-
3 principles/concepts that are included in GAAP. (RET)
- 1. Revenue recognition
- 2. Expense recognition/Matching Principle
- 3. Time-period concept
-
The principle that involves recording revenue when a performance obligation has been satisfied.
Revenue recognition principle
-
Expense Recognition principle is also known as the...
matching principle.
-
The principle that involves recording expenses in the period that the asset is used up.
Expense recognition/Matching principle
-
The expense recognition/matching principle involves matching expenses to...
revenues they help generate.
-
States that a company's activities can be divided into artificial time periods for financial reporting purposes.
Time-period concept
-
The justification for AJEs.
Time-period concept
-
The time-period concept ensures that accounting information is reported at...
regular intervals.
-
9 parts of the accounting cycle. (JPTAAFCPR)
- 1. Journalize
- 2. Post
- 3. Trial balance
- 4. AJEs
- 5. Adjusted trial balance
- 6. Financial statements
- 7. Closing entries
- 8. Post-closing trial balance
- 9. Reversing entries
-
The 2 purposes of AJE. (RU)
- 1. To record revenues and expenses that didn't get recorded yet
- 2. To update balance sheet accounts
-
Always record AJEs on the...
last day of the accounting period.
-
Every AJE includes either a... or... and an ... or...
revenue, expense, asset, liability.
-
Never record... in an AJE.
cash
-
Every AJE affects the... and the...
income statement, balance sheet
-
What type of entries are optional?
Reversing
-
Reversing entries are recorded on the...
1st day of the new accounting period.
-
What is the purpose of reversing entries?
To simplify recording transactions in the period after the AJEs.
-
If there is a debit to an... or a credit to a..., an AJE may be reversed.
asset, liability.
-
Account that involves converting an asset to an expense as it is used up.
Prepaid expense
-
Depreciation and amortization adhere to the...
expense recognition principle.
-
Account that involves converting a depreciable asset to an expense as it is used up using a systematic allocation.
Depreciation/Amortization
-
What type of process is depreciation and amortization?
Cost allocation process.
-
Depreciation and Amortization are NOT a... process.
valuation
-
Account that involves expensing the cost of a plant asset over the periods that benefitted from its use.
Depreciation
-
Does book value represent what an asset is worth?
NO
-
Book value formula.
Cost - accumulated depreciation
-
Depreciation expense formula.
(Cost - salvage value) / Useful life
-
Account that involves recording an expense that is incurred, but not yet paid.
Accrued expense
-
Journal entry for accrued expense.
- Dr. Expense
- Cr. Liability
-
Account that involves recording a revenue that is earned, but not yet collected.
Accrued revenue
-
Journal entry for accrued revenue.
- Dr. Receivable
- Cr. Revenue
-
Account that involves converting a liability to revenue as the revenue is earned.
Unearned revenue
-
What 3 categories of accounts have normal debit balances? (AED)
- 1. Assets
- 2. Expenses
- 3. Dividends
-
What 3 categories of accounts have normal credit balances? (LOR)
- 1. Liabilities
- 2. Owner's equity
- 3. Revenue
-
What type of accounts are never closed out?
Permanent accounts (ALO)
-
What are the 3 categories of permanent accounts? (ALO)
- 1. Assets
- 2. Liabilities
- 3. Owner's equity
-
Where can the permanent accounts be found?
Balance sheet
-
What are the 3 categories of temporary accounts? (RED)
- 1. Revenue
- 2. Expenses
- 3. Dividends
-
Where can the temporary accounts be found?
Income statement
-
Temporary accounts (RED) are closed to which account?
Retained earnings
-
The purpose of a trial balance is to make sure...
debits = credits
-
Why are AJEs required?
To make sure companies follow the revenue and expense recognition principles.
-
What 5 categories of accounts require AJEs? (ALORE)
- 1. Assets
- 2. Liabilities
- 3. Owner's equity
- 4. Revenue
- 5. Expenses
|
|
