Financial Accounting Ch 3 – Flashcards

Accountants divide the economic life of a business into artificial time period because of the

Companies record an expense under cash-basis accepting only when

The monetary unit assumption

Adjustments would not be necessary if financial statements were prepared to reflect net income from lifetime operations monthly operations interim operations fiscal year operations

Management usually desires _____ financial statements and the IRS requires all businesses to file ______ tax returns

The it period assumption is also referred to as the

In general the shorter the time period, the difficulty of making proper adjustments to accounts is unaffected is increased is decreased depends on if there is a profit or loss

Which of the following it NOT a common time period chosen by businesses as their accounting period? quarterly monthly annually daily

A flower shop makes a large sale for $1,200 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,200 considered to be recognized? Dec 10 Dec 1 Dec 5 Nov 30

A candy factory's employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed in February March the period when he workers receive their checks either in February or March depending on when the pay period ends

under accrual-basis accounting, events that change a company's financial statements are recognized in the period thy occur rather than

Which one of the following is NOT an application of revenue recognition? billion customers on June 30 for services completed during June Receiving cash for services performed recording revenue as an adjusting entry on the last day of the accounting period Accepting cash from an established customer for services to be performed over the next three months

Adjusting entries are usually required

Expenses incurred but not yet paid or recorded are called

A law firm received $3,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause net income to be overstated liabilities to be understated revenues to be understated expenses to be overstated

Adjusting entries can be classified as

the _______ assumption divided the economic life of a business into artificial time periods

An accounting period that is one year in length is referred to as a

The ______ principle gives accountants guidance as to when the revenue is to be recorded

The expense recognition principle attempts to match ______ with _____

Failure to adjust a prepaid expense account for the amount expired will cause _______ to be understated and ______ to be overstated

depreciation is a ______ allocation process rater than a process of ____

Depreciation expense for a period is an ______ rather than a factual measurement of cost that has expired

An adjusted trial balance proves the _______ of the total bit and credit balances after all ______ entered have been made

Fiscal Year

expenses paid before they are incurred

cost less accumulated depreciation

divides the economic life of a business into artificial time periods

efforts are related to accomplishments

what type of account is Accumulated depreciation?

recognition of revenue when the performance obligation is satisfied

revenues recognized but not yet received