accrual accounting

Question 1

cash basis accounting

Answer 1

revenue is recorded when cash is received, regardless of when it is actually earned.

You record it when you get the cash in your hands or when the cash transfers hands

Question 2

Accrual accounting

Answer 2

transactions are recorded when they occur, meaning before cash is received

Question 3

Revenue Recognition principle

Answer 3

determines when revenue is recorded and reported.

Usually this happens when the risks and rewards of the goods are transferred to the purchaser by the seller

Question 4

The matching process

Answer 4

requires that expenses be recognized in the same period as revenue they helped generate

Question 5

what type of transactions may require adjustments at the end of the accounting period

Answer 5

accruals: accrued revenue and expenses

prepayments: unearned revenue and decrease in liability

Question 6

Accrued revenue/expense

Answer 6

previously unrecorded revenue/expenses that have been earned/incurred but not payed/ received cash

Question 7

unearned revenues

Answer 7

liabilities arising from receipt of cash for which revenue has not yet been earned

Question 8

prepaid expenses

Answer 8

assets arising from payment of cash that have not bee used or consumed by the end of the period

Question 9

depreciation

Answer 9

for property, plant, and equipment for which whose assets cannot be recorded within the period must be systematically allocated as an expense to each period

Question 10

do contra accounts have a normal credit or debit balance

Answer 10

normal credit balance

Question 11

Contra accounts

Answer 11

opposite of what regular accounts show

Question 12

what is closing accounts

Answer 12

transfer effects of revenue, expenses, and dividends declared to shareholder’s equity, retained earnings, and clear balances in revenues, expenses, and dividends declared

Question 13

why don’t you include revenue or expenses in post-closing trial

Answer 13

because they were already accounted for in the closing balance

Question 14

What is the accounting cycle

Answer 14

1. analyze transactions
2. journalize transactions
3. post to ledge
4. prepare a trial balance
5. prepare adjusting period
6. prepare financial statements
7. post closing entries and post-closing trial balance

Question 15

the closing process

Answer 15

1. close revenues
2. close expenses
3. close income summary
4. close dividends declared