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Flashcards in Adjusting Entries and Worksheet Deck (13)
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changes occur that affect the business's financial condition

end of period adjustments


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


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


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


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


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

salvage value


formula for depreciable cost

original cost - salvage value = depreciable cost


depreciation expense formula

depreciable cost / estimated useful life


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

accumulated depreciation


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

book value


book value formula

book value = cost of plant assets - accumulated depreciation


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



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