Accounting 101-Chapter 4

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Author:
davecowman
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304267
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Accounting 101-Chapter 4
Updated:
2015-06-23 15:21:30
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Chapter4
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Income Measurement and Accrual Accounting
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  1. Recognition
    The process of recording an item in the financial statements as an asset, a liability, a revenue, an expense, or the like
  2. Representations
    Assets, Liabilities, Revenues, and Expenses depicted in financial statements
  3. Historical cost
    The amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets
  4. Current Value
    The amount of cash or its equivalent that could be received by selling an asset currently.
  5. Cash basis
    A system of accounting in which revenues are recognized when cash is received and expenses are recognized when cash is paid.
  6. Accrual basis
    A system of accounting in which revenues are recognized when earned and expenses are recognized when incurred.
  7. Revenues
    Inflows of assets or settlements of liabilities from delivering or producing goods, rendering services, or conducting other activities.
  8. Revenue recognition principle
    Revenues are recognized in the income statement when they are realized and earned.  Revenues are realized when goods or services are exchanged for cash or claims to cash, usually at the time of sale.  This is normally interpreted to mean at the time the product or service is delivered to the customer.
  9. Assets
    Unexpired costs
  10. Expenses
    Expired costs.
  11. Matching Principle
    The association of revenue of a period with all the costs necessary to generate that revenue.
  12. Expenses
    Outflows of assets or incurrences of liabilities resulting from delivering goods, rendering services, or carrying out other activities
  13. Adjusting entries
    Journal entries made at the end of a period by a company using the accrual basis of accounting.
  14. Straight-line method
    The assignment of an equal amount of depreciation to each period.
  15. Contra account
    An account with a balance that is opposite that of a related account.
  16. Deferral
    Cash has been paid or received but expense or revenue has not yet been recognized.
  17. Deferred expense (Prepaid expense)
    An asset resulting from the payment of cash before the incurrence of expense.
  18. Deferred revenue (Unearned revenue)
    A liability resulting from the receipt of cash before the recognition of revenue.
  19. Accrual
    Cash has not yet been paid or received but expense has been incurred or revenue earned.
  20. Accrued liability
    A liability resulting from the recognition of an expense before the payment of cash.
  21. Accrued asset
    An asset resulting from the recognition of a revenue before the receipt of cash.
  22. Accounting cycle
    A series of steps performed each period and culminating with the preparation of a set of financial statements
  23. Work sheet
    A device used at the end of the period to gather the information needed to prepare financial statements without actually recording and posting adjustments.
  24. Real accounts
    The name given to balance sheet accounts because they are permanent and are not closed at the end of the period
  25. Nominal accounts
    The name given to revenue, expense, and dividend accounts because they are temporary and are closed at the end of the period.
  26. Closing entries
    Journal entries made at the end of the period to return the balance in all nominal accounts to zero and transfer the net income or loss and the dividends to Retained Earnings
  27. Interim statements
    Financial statements prepared monthly, quarterly, or at other intervals less than a year in duration.

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