Term
| Supplies and Prepaid expense |
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Definition
Supplies Expense
supplies
Rent, Ins, Adv expense
Prepaid rent, ins, adv. |
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Term
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Definition
Depreciation expense
accumulated depreciation |
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Term
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Definition
salary, interest expense
salary, interest payable |
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Term
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Definition
acct, rent, int. receivable
service, rent, int. revenue |
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Term
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Definition
unearned revenue
service revenue |
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Term
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Definition
| revenue is recorded when RECEIVED IN CASH and expenses recorded when CASH IS PAID |
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Term
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Definition
| revenue is recorded when EARNED and NOT when cash is received; expenses are recorded as incurred and not when cash is paid |
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Term
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Definition
-some transactions affect more than one accounting period
-bring revenue and expense accounts to correct ending balances ; make net income comparable from period to period
-bring balance sheet accounts to correct ending balances |
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Term
False
you NEVER make AJE when using the cash basis! |
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Definition
t/f
make AJE's when using the cash basis; does not apply to accrual basis of accounting |
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Term
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Definition
| tells the accountant WHEN to record revenue and HOW MUCH revenue to record. |
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Term
| the WHEN of the revenue principle |
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Definition
| recorded revenue when the earning process is completed-the service has been performed or the goods delivered |
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Term
| the HOW MUCH of the revenue principle |
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Definition
| record revenue equal to the fair market value of the goods or services exchanged |
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Term
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Definition
| revenue must be recorded in period in which goods are sold or service is performed and EXPENSES must be deducted with the period in wich revenus was earned |
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Term
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Definition
| divide the life of a business into equal reporting periods and measure net income each period; makes financial statement comparable from period to period. accounting period must be: calender, fiscal(end on day other than dec 31) and interim |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| increases retained earnings; sometimes recorded but cash is NOT received until later (interest receivable, owners investment, borrow on notes payable) |
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Term
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Definition
decrease retained earnings; sometimes recorded but no cash is paid (depreciation) or cash is paid later (interest payable)
ex: pay dividends and buy land |
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Term
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Definition
t/f
AJE's always involve one asset or liability and one revenue or expense. NEVER CASH!!! |
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Term
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Definition
| cash flow occurs BEFORE the expense or revenue is recorded on the books (cash now and defer rev/exp till later) |
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Term
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Definition
| cash flow occurs AFTER the expense or revenue is recorded on the books (add rev/exp now and cash later) |
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Term
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Definition
| amounts that will be used up in the near future |
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Term
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Definition
left side: beg balance + sup purchased
(normal ending balance on this side)
right side: -supplies used (sup expense) |
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Term
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Definition
| a non-cash expense; the cost of multi-year asset to expense, over the asset's "useful" life. an estimated expense |
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Term
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Definition
| contra asset account; credit balance. leave historical cost in the asset account |
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Term
| carrying value (book value) formula |
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Definition
| cost-accumulated depreciation= book value |
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Term
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Definition
| cash not paid until later; the expense has ben INCURRED |
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Term
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Definition
| cash not received until later; the revenue has been EARNED |
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Term
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Definition
t/f
adjusted trial balance amounts appear on the financial statements |
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Term
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Definition
| bring temp accounts to a zero balance and then transfer net income (or loss) to retained earnings. |
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Term
FALSE
you NEVER close out permanent accounts |
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Definition
t/f
ALWAYS close permanent accounts; these carry over from period to period and are all balance sheet accounts |
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Term
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Definition
| revenue, expenses, dividends |
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Term
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Definition
| assets, liabilities, common stock, retained earnings |
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Term
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Definition
| cash or assets that will be converted into cash or used up within 1 operating cycle of 1 year |
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Term
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Definition
listed in order of liquidity:
cash
short-term investments
accounts receivable and notes receivable
inventory
prepaid expenses |
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Term
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Definition
listed in order of liquidity:
notes payable
accounts payable
current portion of long-term debt
wages, taxes, interest payable
unearned revenue |
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Term
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Definition
| consists of common stock and retained earnings |
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Term
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Definition
current assets/current liabilities
-one way to evaluate liquidity
-should be greater than 2:1 |
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Term
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Definition
total liabilities/total assets
-one way to evaluate risk
-also useful as a measure of the company's ability to pay both current and long-term debt |
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Term
| 5 types of adjusting entries |
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Definition
1. supplies and prepaid expense
2. depreciation
3. accrued expense
4. accrued revenue
5. unearned revenue |
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Term
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Definition
1. close everything with a CREDIT balance (d-rev and c-r/e)
2. close everything with a DEBT balance (d-r/e and c-expense)
3. close dividends to retained earnings (d-r/e and c-div) |
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Term
FALSE
debits should always equal credit |
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Definition
t/f
on the adjusted trial balance, debits should not equal credits |
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Term
| not all cash inflows are revenues and not all cash outflows are expenses |
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Definition
| why does cash not equal net income? |
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Term
| key words for accounts receivable |
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Definition
"sales on account"
"sold on account"
"collections on account"
"collected on account"
asset
customer |
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Term
| key words for accounts payable |
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Definition
"purchases on account"
"purchased on account"
"payments on account"
"paid on account" |
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Term
| t-account for accounts receivable |
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Definition
left side: beg balance + cr. sales to customer
(normal ending balance also on this side)
right side: -coll from cust. (cash receipts) |
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Term
| t-accounts for accounts payable |
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Definition
left side: -cash paid
right side: beg balance + cr. purchases from vendor
(normal ending balance also on this side) |
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Term
| normal balance sides for debits and credits |
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Definition
left side:
Dividends
Expenses
Assets
right side:
Liabilities
Owners equity
Retained earnings |
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Term
| formula for net income(loss) |
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Definition
| retained earnings- expenses |
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Term
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Definition
-cash
-accounts receivable
-property
-plant
-equipment
-prepaid expenses |
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Term
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Definition
-salary payable
-unearned revenue
-accounts payable
-notes payable |
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Term
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Definition
assets=liabilities+ owners equity
A-O=L
A-L=O |
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Term
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Definition
-most important financial statement
-must be prepared first in order to calculate retained earnings
-reports revenue earned-expenses incurred
-covers PERIOD OF TIME |
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Term
| statement of retained earnings |
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Definition
-includes information about dividends
-covers the same period of time as the income statements |
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Term
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Definition
-(snap shot)
-also known as the statement of financial position
-shows that A=L+O
prepared as of a specific date |
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Term
| formula for owners equity |
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Definition
begining o/e
+/- net income(loss)
-dividends
+investments
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ending o/e |
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Term
| formula for retained earnings |
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Definition
begining r/e
-dividends
+/- net income(loss)
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ending r/e |
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Term
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Definition
| prepaid expenses are _____ and unearned revenue is a ______. |
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