Card Set Information
The term “recognition” means to
report an economic event in the financial statements.
The term “accrual” describes an earnings event that is
recognized before cash is paid or received
The cost of a resource that will produce revenue in the
future is an asset.
Adjusting entries never affect a business’s Cash account.
An adjusting entry to accrue salary expense is a
claims exchange transaction.
Revenues are temporary accounts, but liabilities are not
In the closing process, the amounts in temporary accounts are moved to
Retained Earnings, a permanent account.
Immediately after closing, every temporary account has a balance of
Accounts that are closed include expenses and
not UNEARNED REVENUES
After closing, the only accounts with non-zero balances are
assets, liabilities, and equity.
Two of the steps in the accounting cycle are adjusting the accounts and closing the accounts.
Cash-basis accounting often fails to match expenses with revenues.
The matching concept leads accountants to select the recognition alternative that produces the lowest amount of net income.
A company sometimes recognizes a revenue or expense, even though the corresponding cash collection or payment does not occur in the same accounting period.
The collection of an account receivable is a claims exchange transaction.
Providing services to customers on account is an
asset source transaction.
An adjusting entry that decreases Unearned Service Revenue and increases Service Revenue is a claims exchange transaction.
Revenue is the economic benefit derived from operating a business.
Often, the recognition of revenue is accompanied by an increase in liabilities.
the collection of cash
an example of an accrual
interest earned but not received
The entry to recognize salary expense incurred but not yet paid involves which of
an increase in liabilities
Recording accrued salary expense at the end of an accounting period causes an increase in
Salaries Expense and
an increase in a liability
Which of the following costs is considered an expense?
payment of cash for current utility bill, payment of cash for equipment or purchasing supplies would be assets
Which of the following costs is considered an asset?
purchase of equipment for cash
The adjustment to record the completion of services for which clients had paid in
advance would involve which of the following?
a decrease in liabilities and an increase in equity
If a company purchases supplies on account, this transaction would cause
liabilities to increase
Sort cash, accounts payable, common stock, land, accounts receivable
common stock= stockholder's equity
Accounts receivable= assets
Recognition of revenue may result in which of the following?
an increase in assets
Which of the following financial statement elements is closed at the end of an
Which of the following accounts would not be closed at the end of an accounting
The matching concept refers to the "matching" of:
expenses and revenues
The result of the matching process is best reported on which financial statement?
Which of the following accounts is a permanent account?
asset source transaction
increases business's assets (cash) and its stockholders' equity
asset exchange transaction
reflects changes in the composition of assets
represents an economic benefit a company obtains by providing customers with goods and services
All asset use transactions do what
decrease the total amount of assets and the total amount of claims on assets (liabilities or stockholders' equity).
The assets and services consumed to generate revenue are called
liabilities+common stock+ retained earnings
asset source transaction
increase the total amount of assets and increase the total amount of claims
asset exchange transactions
decrease one asset and increase another asset.Total amount of assets is exchanged
asset use transactions
decrase the total amount of assets and the total amount of claims
matches the revenues that occur during a period when operating a business.
If expenses are greater than revenues, the difference is called
The practice of pairing revenues with expenses on the income statement is called the
total assets balance with equal liabilities and stockholder's equity.
statement of cash flows
explained how a company obtained and used cash during the accounting period.
financing activities include
obtaining cash (inflow) from owners or paying cash (outflow) to owners (dividends)
investing activities involve
paying cash (outflow) to purchase long-term assets or receiving cash (inflow) from selling long-term assets.
operating activities involve
receiving cash (inflow) from revenue and paying cash (outflow) for expenses.
At the end of the accounting period, revenue, expense, and dividend accounts data is moved to
transferring account balances into retained earnings is called
since revenue, expense, and dividend accounts are closed each period, they are called
--------- is a permanent account, bebcause it carries forward from one accounting period to the next