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Flashcards in Month end / year end normal journal entries etc Deck (13)
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1

what are end of period adjustments

journal entries made to the accounts of a business prior to the preparation and distribution of F.S for a given accounting period

2

what principle is used

matching principle

3

what are the two methods

Cash accounting and accrual accounting

4

describe cash accounting

recognize when the cash is received or paid out
revenue is recorded when cash Is received
expense is recorded when cash paid out

5

describe accrual accounting

record revenue when a legal obligation on the customer is created
record expenses when the business incurs a legal liability to pay , regardless of when the cash is actually exchanged

6

what does accrual account require

requires that adjusting entries are made to the accounts to ensure that all the revenue earned in an accounting period together with all the expenses incurred in earning that revenue are recorded and reported in the same accounting period

7

What is an accrual

end of period adjustments made under the matching principle that recognizes those revenues earned and expenses incurred in the current period but have not yet been recorded in the books

8

what is a deferral

end of period adjustments made under the matching principle that transfer to future accounting periods those revenues and expenses recorded in the current period but in fact belonging to these future periods

9

what is accrued revenue

adding transactions for revenue that has not yet be invoiced (ie partially completed work) ie 6 month contract

10

What is accrued expenses

adding transactions for expenses that have not yet been recognized. ie electricity bill (not been billed by the supplier yet)

also deprecation expense

11

what is deferred revenue

unearned revenue (liability until it is earned)

12

what is a deferred expense

prepaid expense (ie prepaid insurance)

13

What are some asset adjustments

1. A/R - bad debts and Doubtful accounts
2. Fixed assets - depreciation
3, Inventory - damage, stolen, etc differences