Term
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Definition
| the process followed by entities to analyze and record transactions, adjust the records at the end of the period, prepare financial statements, and prepare the records for the next cycle |
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Term
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Definition
| a list of all accounts with their balances to provide a check on the equality of the debits and credits |
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Term
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Definition
| entries necessary at the end of the accounting period to measure all revenues and expenses of that period; always include one income statement account and one balance sheet account |
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Term
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Definition
| (unearned revenues) previoiusly recorded liabilities that need to be adjusted at the end of the accounting period to reflect the amount of revenue earned |
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Term
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Definition
| previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and the related receivable account |
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Term
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Definition
| previously acquired assets that need to be adjusted at the end of the accounting period to reflect the amount of expense incurred in using the asset to generate revenue |
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Term
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Definition
| an account that is an offset to, or reduction of, the primary account |
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Term
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Definition
| (book value, carrying value) the difference between an asset's acquisition cost, and accumulated depreciation, its related contra-account |
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Term
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Definition
| previously unrecorded expenses that need to be adjusted at the end of the accounting period to reflect the amount incurred and the related payable account |
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Term
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Definition
| (real accounts) the balance sheet accounts that carry their ending balances into the next accounting period |
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Term
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Definition
| (nominal accounts) income statement accounts that are closed to retained earnings at the end of the accounting period |
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Term
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Definition
| transfers balances in temporary accounts to retained earnings and establishes zero balances in temporary accounts |
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Term
| Contributed Capital on Statement of Stockholders' Equity |
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Definition
| beginning balance + stock issuances - stock repurchases = ending balance |
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Term
| Retained Earnings on Statement of Stockholders' Equity |
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Definition
| beginning balance + net income - dividends |
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Term
| Earnings per Share equation |
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Definition
| net income/Average number of shares of common stock outstanding during the period |
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Term
| Net Profit Margin Equation and Use |
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Definition
Net Income/Net Sales (or Operating Revenues)
Measures how much of every sales dollar generated during the period is profit |
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Term
| Post-Closing Trial Balance |
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Definition
| should be prepared as the last step of the accounting cycle to check that debits equal credits and all temporary accounts have been closed |
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Term
| Four Types of Adjusting Entries |
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Definition
| deferred revenues, accrued revenues, deferred expenses, accrued expenses |
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Term
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Definition
So that
1)Revenues are recorded when they are earned (revenue principle)
2)Expenses are recorded when they are incurred to generate revenue (matching principle)
3)Assets are reported at amounts that represent the probable future benefits remaining at the end of the period
4)Liabilities are reported at amounts that represent the probable future sacrifices of assets or services owed at the end of the period |
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Term
| Two Entries involved in all adjustments |
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Definition
1)cash receipt or payment
2)revenue expense in the proper period through the adjusting entry |
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Term
| 3 Steps for analyzing adjustments at the end of the period |
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Definition
1)Ask if there is revenue earned or an expense incurred that is not yet recorded
2)Ask if the related cash was received or paid in the past or will it be received or paid in the future:
was received - reduce the liability account (usually Unearned Revenue)
will be received - increase the receivable account
was paid - reduce the asset account
will be paid - increase the payable account
3)Compute the amount of revenue earned or expense incurred |
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Term
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Definition
| an allocation of an asset's cost over its estimated useful life to the company |
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Term
| 2 Purposes of a closing entry |
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Definition
1)to transfer the balances in the temporary accounts (income statement accounts) to Retained Earnings
2)to establish a zero balance in each of the temporary accounts to start the accumulation in the next accounting period |
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