Accounting Chapter 3 Flashcards
What dose accrual accounting do
Records revenue only when it is earned
What’s Another name for the matching principle
Expense recognition principle
What is the matching principle
Ensures that all expenses are recorded when they are incurred during the period and matched those expenses against the revenues for that period
What is the time period concept
Assumes that a business’s activities can be sliced into small time segments and that financial statements can be prepared for specific periods
Revenue recognition principle
Requires revenue to be recorded only after the business he earned it
Residual value
The expected value of a depreciable asset at the end of its useful life
Straight line method
A depreciation method of equal amount of depreciation each year
Cost-residual value
———————
Useful life
Accumulated depreciation
The sum of all the depreciation expense recorded to date for a depreciable asset
Contra asset
Is paired with its related account and is not the noremal balance (debit/credit)
Net book value
A depreciable asset’s coat minus the accumulated depreciation
Deffred rev
In earned
Gave it before earned
Accrued rev
Haven’t been paid
Did something before money
AR=Debit
AP=credit
Accrued expense
Incurred expense but haven’t paid
Debit expenses/AP
Credit cash
Accrual account…
Records revenue only when it’s earned
Adjusting accounts is
Updating each account at the end of each period
