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Accounting chapter 3 TOF

  1. Depreciation
    The process of allocating the cost of an asset to expense over its useful life in a rational and sysematic manner
  2. Time-period assumption
    the assumption that the economic life of a business can be divided into artificial time periods
  3. matching principle
    the principle that efforts (expenses) be matched with accomplishments (revenues).
  4. Revenue recognition principle
    the principle that revenue be recognized in the accounting period in which it is earned
  5. Fiscal years
    accounting periods that are one year in length
  6. Contra asset account
    an account that is offset against an asset account in the balance sheet
  7. adjusted trial balance
    a list of accounts and their balances after all adjustments have been made
  8. prepaid expenses
    expenses paid in cash and recoreded in an asset account before they are used or consumed
  9. unearned revenues
    revenues recieved and recoreded as liabilities before they are earened
  10. adjusting entries
    entries made at the end of the accounting period to insure that the revenue recognition and matching principles are followed
  11. accrued revenues
    revenues earned but not yet recieed at the statement date
  12. accrued expenses
    expenses incurred but not yet paid or recoreded at the statement date
  13. accrual basis of acounting
    an accounting basis in which events that change a company's financial statements are recorded in the periods in which the events occur
  14. cash basis of accounthing
    revenue is recorded only when cash is received and expense is recoreded only when cash is paid
  15. TOF
    The time-period assumption assumes that the economic life of a business can be divided into artificial time periods
    TRUE
  16. TOF
    A calender year and a fiscal year must be the same
    • FALSE,
    • The calender year beings January 1 and ends December 31. Fiscal yeas usually begin with the first day of any month and end on the last day of a month, twelve months later. Of course, the fiscal year could coincide with the calender year
  17. TOF
    The revenue recognition principle states that revenue should be recognized in the accounting period cash is recieved
    • FALSE
    • The revenue recognition principle states that revenue should be recognized in the accounting period in which it is earned. Sometiems the receipt of cash does not coincide with the period in which the service is rendered
  18. TOF
    the matching principle requires that expenses be matcheed with revenues
    TRUE
  19. TOF
    Adjusting entries are journalized throughout the accounting period.
    • FALSE
    • Adjusting entreis are only prepared at the end of an accounting period
  20. In general adjusting entreis are required each time financial statements are prepared
    TRUE
  21. TOF
    In general adjusting entreis are necessary even if the records are free of errors
    TRUE
  22. TOF
    Every adjusting entry affects one balance sheet account and one income statement account
    TRUE
  23. TOF
    Adjusting entries are journalized but need not be posted
    • FALSE
    • Adjusting entreis must be both journalized and posted
  24. TOF
    Prepaid expenses are expenses paid in cash and recorded in an asset account before they are used or consumed
    TRUE
  25. TOF
    Depreciation is a process of valuation
    • FALSE
    • Depreciation is the process of allocating the cost of an asset to expense over its useful life in a rational and systematic manner
  26. TOF
    The accumulated Depreciation account is a contra asseet account that is reported on the balance sheet
    TRUE
  27. TOF
    The difference between the cost of an asset and its related accumulated depreciation is referred to as the asses book value
    TRUE
  28. TOF
    Revenues received in advanced of the accouting period in which theya re earned are liabilites
    TRUE
  29. TOF
    Accrued revenues are amounts recorded and recieved but not yet earned
    • FALSE
    • accured revenues are revenues earned but not yet recieved in cash
  30. TOF
    Accrued expenses are prepayments of expenses that will benefit mroe than one accounting period
    • FALSE
    • accrued expense are expenes incurred but nto paid or recorded
  31. TOF
    an adjusting entry for accrued expenses results in an increased (a debit) to an expense account and an increase (a credit) to a liability account
    TRUE
  32. TOF
    An adjusted trial balance should be prepaired before the adjusting entries are made
    • FALSE
    • The adjusted trial balance can only be prepared after the adjusting entreis are made
  33. TOF
    The acounts in the adjusted trial balance contains all data that are needed for the preparation of finicial statements
    TRUE
  34. TOF
    When a prepaid expense is initially debited to an expense account expenses and assets are both overstated prior to adjustment
    • FALSE
    • prior to adjustment, expenses are overstated and assets are understated
  35. TOF
    When the unearned revenue is initially creditied to a revenue account, the adjusting entry willr esult in a debit to a revenue account and a credit to a liability account
    TRUE
Author
ndumas2
ID
66822
Card Set
Accounting chapter 3 TOF
Description
True false and terms for Accounting chapter 3
Updated

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