Int. Accounting (Ch.3)

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  1. Type of accounting that involves recording revenue when cash is received from customers and recording expenses when cash is paid.
    Cash-basis accounting
  2. Type of accounting that involves recording revenue when earned and recording expenses in the period in which they are incurred.
    Accrual-basis accounting
  3. Which type of accounting is required by GAAP?
  4. 3 principles/concepts that are included in GAAP. (RET)
    • 1. Revenue recognition
    • 2. Expense recognition/Matching Principle
    • 3. Time-period concept
  5. The principle that involves recording revenue when a performance obligation has been satisfied.
    Revenue recognition principle
  6. Expense Recognition principle is also known as the...
    matching principle.
  7. The principle that involves recording expenses in the period that the asset is used up.
    Expense recognition/Matching principle
  8. The expense recognition/matching principle involves matching expenses to...
    revenues they help generate.
  9. States that a company's activities can be divided into artificial time periods for financial reporting purposes.
    Time-period concept
  10. The justification for AJEs.
    Time-period concept
  11. The time-period concept ensures that accounting information is reported at...
    regular intervals.
  12. 9 parts of the accounting cycle. (JPTAAFCPR)
    • 1. Journalize
    • 2. Post
    • 3. Trial balance
    • 4. AJEs
    • 5. Adjusted trial balance
    • 6. Financial statements
    • 7. Closing entries
    • 8. Post-closing trial balance
    • 9. Reversing entries
  13. The 2 purposes of AJE. (RU)
    • 1. To record revenues and expenses that didn't get recorded yet
    • 2. To update balance sheet accounts
  14. Always record AJEs on the...
    last day of the accounting period.
  15. Every AJE includes either a... or... and an ... or...
    revenue, expense, asset, liability.
  16. Never record... in an AJE.
  17. Every AJE affects the... and the...
    income statement, balance sheet
  18. What type of entries are optional?
  19. Reversing entries are recorded on the...
    1st day of the new accounting period.
  20. What is the purpose of reversing entries?
    To simplify recording transactions in the period after the AJEs.
  21. If there is a debit to an... or a credit to a..., an AJE may be reversed.
    asset, liability.
  22. Account that involves converting an asset to an expense as it is used up.
    Prepaid expense
  23. Depreciation and amortization adhere to the...
    expense recognition principle.
  24. Account that involves converting a depreciable asset to an expense as it is used up using a systematic allocation.
  25. What type of process is depreciation and amortization?
    Cost allocation process.
  26. Depreciation and Amortization are NOT a... process.
  27. Account that involves expensing the cost of a plant asset over the periods that benefitted from its use.
  28. Does book value represent what an asset is worth?
  29. Book value formula.
    Cost - accumulated depreciation
  30. Depreciation expense formula.
    (Cost - salvage value) / Useful life
  31. Account that involves recording an expense that is incurred, but not yet paid.
    Accrued expense
  32. Journal entry for accrued expense.
    • Dr. Expense
    •    Cr. Liability
  33. Account that involves recording a revenue that is earned, but not yet collected.
    Accrued revenue
  34. Journal entry for accrued revenue.
    • Dr. Receivable
    •    Cr. Revenue
  35. Account that involves converting a liability to revenue as the revenue is earned.
    Unearned revenue
  36. What 3 categories of accounts have normal debit balances? (AED)
    • 1. Assets
    • 2. Expenses
    • 3. Dividends
  37. What 3 categories of accounts have normal credit balances? (LOR)
    • 1. Liabilities 
    • 2. Owner's equity
    • 3. Revenue
  38. What type of accounts are never closed out?
    Permanent accounts (ALO)
  39. What are the 3 categories of permanent accounts? (ALO)
    • 1. Assets
    • 2. Liabilities
    • 3. Owner's equity
  40. Where can the permanent accounts be found?
    Balance sheet
  41. What are the 3 categories of temporary accounts? (RED)
    • 1. Revenue
    • 2. Expenses
    • 3. Dividends
  42. Where can the temporary accounts be found?
    Income statement
  43. Temporary accounts (RED) are closed to which account?
    Retained earnings
  44. The purpose of a trial balance is to make sure...
    debits = credits
  45. Why are AJEs required?
    To make sure companies follow the revenue and expense recognition principles.
  46. What 5 categories of accounts require AJEs? (ALORE)
    • 1. Assets
    • 2. Liabilities
    • 3. Owner's equity
    • 4. Revenue
    • 5. Expenses
Card Set:
Int. Accounting (Ch.3)
2015-09-20 03:39:50

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