Accounting 201Chapter 03 Power Point

Question 2

What you learn from Accounting Chapter 3?

Answer 2

The Financial ReportingProcess.Accrual-Basis AccountingThe Measurement Process

Question 3

Define Revenue and Expense Reporting

Answer 3

• Accounting information – necessary for decision making.- To be useful in decision making – accountants must report revenues and expenses in a way that reflects the ability of the company to create value for its owners.- Accrual-basis accounting reco

Question 4

Define Revenue Recognition Principle

Answer 4

Recognize revenue when it is earned- Calvin books a cruise with Carnival Cruise Lines,the world’s largest cruise line. He makesreservations and pays for the cruise in November2012, but the cruise is not scheduled to sail untilApril 2013.- When does Carnival report revenue from theticket sale?

Question 5

Define Matching Principle

Answer 5

Expenses are reported with the revenues theyhelp to generate.

Question 6

What are the steps involved with “Point of Difference”

Answer 6

Revenue Recognition, recording Expenses, GAAP

Question 7

What are the steps involved with “Accrual Basis.”

Answer 7

When revenue is earned, with related revenues, Part of GAAP

Question 8

What are the steps involved with “Cash Basis.”

Answer 8

When Cash is Received, When Cash is Paid, Not Part of GAAP.

Question 9

What are the step involved Adjusting Entries and the Accounting Cycle?

Answer 9

Measurement Process = External Transactions, record and Post External Transactions.Adjusting Entries, Record and post Adjusting Entries.Reporting Process = Prepare Financial StatementsClosing Process = Report and Post closing entries.

Question 10

Define Post Adjusting Entries

Answer 10

Post adjusting entries To the T-accounts in thegeneral ledger To update the account balances.- Prepare an adjusted trial balance.- an adjusted trial balance is a list of all accounts and their balances after we have updated accountbalances for adjusting entries.

Question 11

Name the financial statement used in the reporting process.

Answer 11

adjusted trial balance- Income Statement- Statement of Stockholders’ Equity- Classified balance Sheet

Question 12

Define Closing Entries

Answer 12

Transfer the balance of all revenue, expense, anddividend accounts To the balance of retainedearnings.- Increase the retained earnings account by theamount of revenues and decrease retained earningsby the amount of expenses and dividends.- the balance of each revenue, expense, and dividendaccount equals zero after closing entries.- Do not affect the balances of permanent accountsother than retained earnings.