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0

Adjusting entries are done to record ...

Internal transactions

1

The adjusting is based on 3 gaap principles

Time period, revenue recognition. Matching

2

Time period principle

States activities that can be divided into specific time periods.

3

Time periods are also called

Accounting periods or reporting periods

4

Reports covering a single year are called

Annual financial statements

5

Interim financial reports

Cover any time period

6

Two main principles used during adjustments are

Matching principle and revenue recognition principle

7

Accrual basis accounting

Revenue and expenses match with the timeline they actually occurred

8

Cash basis accounting

Revenue and expenses are recognized when cash exchanges hands . Not consistent with gaap , therefore not used

9

Adjustments

Prepaid expense
Amortization
Unearned revenue
Accrued ex
Accrued rev

10

Prepaid expenses

Supplies decrease in assets and are credited and increase in expense account once used up and debited

11

Ammortization

Process of spreading the cost of assets over their useful life

12

Tangible assets

Property, plant and equipment

13

Intangible assets

Patents

14

3 main depreciation

Straight line, sum of years , dealing method

15

Straight line

Cost- value at end of life / useful life

16

Residual value

Value at end of life

17

Accumulated amortization

Contra asset account

18

Contra asset account

Is linked with another account that has an opposite normal balance

19

The cost minus accumulated amortization gives

The book value

20

Market value

Amount it could be sold for

21

Unearned revenue are also known as

Deferred revenue

22

Accrued expenses

Costs incurred in a period that are unpaid and unrecorded

23

Accrued interest expense

Intrest is common on notes payable. It is not paid at the end of each accounting period

24

Yearly interest equation

Interest = principle of notes payable x annual rate x time in years

25

Interest is always expressed in

Per annum (years)

26

An adjustment for accrued salaries occurs

When employees have worked within the acc period , but this has not yet been recorded as an expense

27

The adjusted trial balance must be prepared before the adjusting entries are made

False