Chapter 3 accounting quiz – Flashcards
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accrual-basis accounting
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record revenues when earned, (revenue recognition) and expenses with related revenues (expense recognition)
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accrued expense
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when a company has incurred an expense but hasn't yet received cash or recorded an amount receivable.
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accrued revenue
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when a company has earned revenue but hasn't received cash or recorded an amount receivable.
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adjusted trial balance
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a list of all accounts and their balances after we have updated accounted balances for adjusting entries.
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adjusting entries
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entries used to record events that occur during the period but that have not been recorded by the end of the period.
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book value
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an assets original cost less accumulated depreciation
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cash basis accounting
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record revenues at the same time cash is received and expenses the same time cash is paid.
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classified balance sheet
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balance sheet that groups a companies assets into current assets and long term assets and that separates liabilities into current and long term liabilities.
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closing entries
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entries that transfer the balances of all temporary accounts(revenues, expenses, and dividends) to the balance of the retained earnings account.
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contra account
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contra account an account with a balance that is opposite or contra to that of its related accounts.
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depreciation
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the process of allocating the cost of a long term asset to expense over its useful life.
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matching principle
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recognize expenses in the same period as revenues they help to generate
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permanent accounts
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all accounts that appear in the balance sheet; account balances are carried forward from period to period.
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post closing trial balance
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a list of all accounts and their balances at a particular date gayer we have updated account balances for closing entries.
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prepaid expenses
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the costs of assets acquired in one period that will be expensed in a future period
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revenue recognition principle
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record revenue in the time which it's earned
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temporary accounts
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all revenue expenses and dividend accounts; account balances are maintained for a single period and then closes or zeroed out and transferred to the balance of the retained earnings account at the end of the period
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unearned revenues
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when a company receives cash in advance from a customer for products or sercuces to be provided in the future.
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A list of all accounts and their balances after posting closing entries is referred to as?
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a post-closing trial balance
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The revenue recognition principle states that:
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Revenue should be recognized in the period earned.
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Which accounting principle states that a company should "record revenues when they are earned"?
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the revenue recognition principle
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When a company prepares closing entries, which one of the following is NOT a correct closing entry?
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Debit Dividends; credit Retained Earnings.
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When a company makes an end-of-period adjusting entry, which includes a debit to Supplies Expense, the usual credit entry is made to:
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Supplies
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The primary difference between accrual-basis and cash-basis accounting is:
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The timing of when revenues and expenses are recorded.
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what is the purpose of closing entries
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Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.
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When the balance of the Unearned Revenue account decreases during an accounting period:
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Accrual-basis revenues exceed cash collections from customers.
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When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent, the debit is usually made to:
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rent expense
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Which of the following accounting principles states that expenses are recognized in the same period as the revenues they help to generate?
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Matching.
