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Flashcards in Adjusting Entries and Worksheet Deck (13)
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1

changes occur that affect the business's financial condition

end of period adjustments

2

requires the matching of revenues earned during an accounting period with the expenses incurred; provides best measure of net income; necessitates amounts to be brought up to date before financial statements are prepared

matching principle

3

12 month period of time used as an accounting period; does not need to be same as a calendar year; many business schedule their fiscal year to end when business is slow

fiscal year

4

period of time that an asset is expected to help produce revenues; expires as a result of wear and tear or because it no longer satisfies the needs of business

useful life

5

method of matching an assets original cost against the revenue produced over useful life; based on estimates of useful lives and salvage values

depreciation expense

6

expected market value/selling price of an asset at end of its useful life

salvage value

7

formula for depreciable cost

original cost - salvage value = depreciable cost

8

depreciation expense formula

depreciable cost / estimated useful life

9

is a contra-asset account; has a credit balance; is deducted from the related asset account on balance sheet

accumulated depreciation

10

value carried on the books/in accounting records; undepreciated cost

book value

11

book value formula

book value = cost of plant assets - accumulated depreciation

12

pulls together all information needed to enter adjusting entries, prepare financial statements; is not a financial statement; not a formal part of accounting system; commonly 10 column format; only accountant uses

worksheet

13

preparing worksheet 5 steps

1. prepare trial balance
2. prepare adjustments
3. prepare adjusted trial balance
4. extend adjusted balance to income statement and balance sheet columns
5. complete worksheet