accbp 6

61問 • 1年前

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Under this method of accounting, accountants record transactions as they OCCUR. Meaning, REVENUES are recognized when EARNED and EXPENSES are charged when INCURRED

accrual basis accounting

Accountants record the transaction when cash is RECEIVED or PAID. Meaning, REVENUES are recognized when COLLECTED and EXPENSES are charged when PAID.

cash basis accounting

It is a period of any 12 consecutive months

fiscal year

It is an annual period ending on the december 31

calendar year

It is a 12 month period that ends when business activities are at their lowest level of the annual cycle

natural business year

A period of less than a year

interim period

This is the postponement of the recognition of "AN EXPENSE ALREADY PAID BUT NOT YET INCURRED" or of "REVENUE ALREADY COLLECTED BUT NOT YET EARNED"

deferral

This is the recognition of "AN EXPENSE ALREADY INCURRED BUT UNPAID", or "REVENUE EARNED BUT UNCOLLECTED"

accrual

Allocation of the cost of an asset over its estimated life

depreciation

Is the amount an entity paid to acquire the depreciable asset

asset cost

Is the amount that the asset can probably be sold at the end of its estimated useful life

estimated salvage value

Is the estimated number of periods that an entity can make use of the asset.

estimated useful life

It is an estimate, not an exact measurement

useful life

An accounting method to allocate depreciation where the cost of the asset is depreciated with the same amount every period

straight line method

A contra-account of an asset of property, plant, and equipment. This is deducted for the from the cost of the asset to get the CARRYING AMOUNT

accumulated depreciation

ACCUMULATED DEPRECIATION is deducted from the cost of the asset to get the ______

carrying amount

This is a charge for the use of money over time

interest

The ______, except for the ______ are prepared on the accrual basis of accounting in order to meet their objectives

financial statements cash flow statement

Under the ______, the effects of transactions and other events are recognized when they OCCUR and not as CASH is RECEIVED or PAID

accrual basis

Inform users not only of the past transactions involving the payment and receipt of cash, but also of obligations to pay cash in the future, and of resources that represent cash to be received in the future

financial statements prepared on accrual basis

Require that a business use the accrual basis

generally accepted accounting principles or gaap

To provide timely information, accountants have divided the economic life of a business into artificial time periods

periodicity concept

Accounting periods are generally

a month a quarter a year

The most basic accounting period is _____

1 year

Ensures that accounting information is reported at regular intervals

periodicity concept

It interacts with the revenue recognition and expense recognition principles to underly the use of accruals

periodicity concept

Should be recognized when earned

revenue

Is recognized when it is probable that economic benefits will flow to the enterprise and these economic benefits can be measured reliably

revenue

REVENUE shall be measured at the ____ of the consideration received or receivable

fair value

Is earned in the accounting period when the services are rendered or the goods sold are delivered

revenue

Is the basis for recording expenses

expense recognition principle

Are recognized in the income statement when it is probable that a decrease in the future economic benefits related to a decrease in asset or an increase in a liability has risen, and that the decrease in economic benefits can be measured reliably

expense

EXPENSES are recognized in the income statement on the basis of _____ between the costs incurred and the earning specific items of income

direct association

When economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or indirectly determined, expenses are recognized in the income statement on the basis of ______ procedures

systematic and rational allocation

An ______ is recognized immediately in the income statement when an expenditure produces no future benefits

expense

Accountants make _____ to reflect in the accounts information on economic activities that have occurred but have not yet been recorded.

adjusting entries

Assign revenues to the period in which they are earned, and expenses to the period in which they are incurred

adjusting entries

These entries are needed to measure properly the profit for the period, and to bring related asset and liability accounts to correct balances for the financial statements

adjusting entries

Involve changing account balances at the end of the period from what is the current balance of the account to what is the correct balance of the account for proper financial reporting

adjusting entries

Without ______, financial statements may not fairly show the solvency of the entity in the balance sheet and the profitability in the income statement

adjusting entries

There are TWO GENERAL TYPES OF ADJUSTMENTS made at the end of the accounting period

defferals and accruals

Accountants use ______ to apply accrual accounting to transactions that cover more than one accounting period

adjusting entries

Each adjusting entry affects a _____ account an (________) and an ______ account (________)

balance sheet - asset or liability account income statement - income or an expense account

Deals with an amount already recorded in a balance sheet account; the entry, in effect, DECREASES the BALANCE SHEET ACCOUNT and INCREASES an INCOME STATEMENT ACCOUNT

deferral adjustment

Allocating assets to expense to reflect expenses incurred during the accounting period (Ex: prepaid insurance, supplies and depreciation)

deferrals

Allocating revenues received in advance to revenue to reflect revenues earned during the accounting period (Ex: subscriptions)

deferral

Deals with an amount and recorded in any account; the entry, in effect, increases both a balance sheet and an income statement account

accrual adjustment

Occurring expenses to reflect expenses incurred during the accounting period that are unpaid and unrecorded

accrual

Accruing revenues to reflect revenues earned during the accounting period that are uncollected and unrecorded

accrual

Some expenses are customaryly paid in advance

prepaid expenses

Are assets, not expenses

prepaid expenses

It expires either with the passage of time or through use and consumption

prepaid expenses

If adjustments for _____ are not made at the end of the period, both the balance sheet and the income statement will be misstated

prepaid expenses

If adjustments for PREPAID EXPENSES are not made, the assets of the entity will be ______; and the expenses of the company will be _____

overstated understated

If adjustment for PREPAID EXPENSES are not made, OWNERS EQUITY in the balance sheet and profit in the INCOME STATEMENT will both be _____

overstated

An entity often incurs expenses before paying for them

accrued expenses

An entity may provide services during the period that are neither paid for by clients nor billed at the end of the period

accrued revenues

Any revenue that has been earned but not recorded during the accounting period calls for an adjusting entry that DEBITS an ASSET account and CREDITS an INCOME account

accrued revenue

If the accounting period ends on a date that does not coincide with the scheduled cash payment date, an adjusting entry is needed to reflect the expense incurred since the last payment

accrued expenses

Some of the accounts will never be collected; hence, there is a need to reflect these as charges against income

accrual for uncollectible accounts

When an accountant failed to include the proper adjusting entries, the resulting financial statements will not accurately reflect the financial position and the performance of the entity

effects of omitting adjustments

Business Finance

Sab Sescon · 46問 · 2年前

Business Finance