Accural Accounting Flashcards
Prepaid expense- classification and definition
Current asset
Expenses that have been paid for in advance but not yet consumed
Prepaid expense- general journal entry
Dr- rent expense
Cr- prepaid rent
Prepaid expense- balance sheet entry
Current prepaid account balance
Leftover balance
Accused expense- classification and definition
Current liability
Expenses that have been consumed but not yet paid for
Accured expense- general journal entry
Dr- expense account
Cr- accured expense
Unearned income- classification and definition
Current liability
Income that we have received but the work has not yet been performed
Unearned income- general journal entry
Dr- unearned income
Cr- income account
Accured income- classification and definition
Current asset
Income where we have done the work but not yet been paid for
Accured income- journal entry
Dr- accured income
Cr- income account
General journal
The amount consumed (expense)
Balance sheet
Amount leftover
Asset definition
An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
Asset framework
- probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably
- when expenditure has been incurred for which it is considered improbable that economic benefits will flow to the entity beyond the current accounting period
Liability definition
Is a present obligation of the entity resulting from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
Liability recognition
Probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which the settlement will take place can be measured reliably
Equity definition
Is the residual interest in the assets of the entity after deducting all its liabilities
Income definition
Increases in economic benefit during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants
Income recognition
Recognised when an increase in future economic benefits related to an increase in asset or a decrease of a liability has arisen that can be measured reliably
Expense definition
Decreases in economic benefits during the accounting period in the form of outflows or deletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants
Expense recognition
When a decrease in future economic benefits related to a decrease in an asset or a liability has arisen that can be measured reliably
Occurs simultaneously with the recognition of an increase in liabilities or a decrease in assets
Accrual accounting
Is where revenue and expenses are recorded when they are incurred, not when they are paid for
Eg. Income is recorded when earnt not when payment is received
