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ACCT203 > Ch 3: Adjusting Accts for Financial Statements > Flashcards

Ch 3: Adjusting Accts for Financial Statements Flashcards

1
Q

the value of info is often linked to..

A

its timeliness

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2
Q

time period assumption

A

presumes a business activities can be divided into specific time periods

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3
Q

annual financial statements

A

reports covering a 1 year period

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4
Q

interim financial statements

A

report covering 1,3,6 month period

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5
Q

fiscal year fnan statement

A

consisting of 12 consecutive months or 52 weeks

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6
Q

natural business year fnan statement

A

12 month period that ends when sales are at lowest

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7
Q

accrual basis accounting

A

records revenue when services/goods are delivered and records expenses when incurred

required by gaap

(goes month by month(cost/months))

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8
Q

cash basis accoutning

A

records revenue when cash is recieved and record expenses when cash is paid

*all at once

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9
Q

what are the 4 types of adjustments

A

-deferral expense
-deferral of revenue
-accrued expense
-accrued revenue

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10
Q

what is the 3 step process for adjustments

A

1-determine what the current acc balance equals

2- determine what the current balance acc should equal

3- record an adjustment entry that shows process of going from step 1 to step 2

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11
Q

every adjusting entry affects???

A

One or more balance sheet accounts and one or more income statement accounts

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12
Q

adjusting entries do not affect what account

A

the cash account

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13
Q

when assets such as prepaid get used what does it become

A

it becomes an expense

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14
Q

prepaid expenses reflect transactions when cash is paid…

A

before the related expense is recognized

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15
Q

plant assets

A

-refer to long term tangible assets that are used to produce/ sell goods/services.

-Are expected to provide benefits for more than 1 acct period.

-eventually deprecitate

-ex machine

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16
Q

depreciation

A

allocation of the costs of these assets over their life

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17
Q

contra asset

A

acc linked w another acc and has an opposite normal balance

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18
Q

book value

A

net amount-acc depreciation

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19
Q

straight line depreciation

A

(cost of asset-salvage value)
/
useful life months or years

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20
Q

journal entry for depreciation

A

debit-depreciation expense
credit-accumulated depreciation

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21
Q

deferred expeses accounts

A

-supplies
-prepaid insurance
-depreciation

22
Q

deferred revenue definition + adj entry

A

unearned revenue-when you receive money in advance but have not provided the service yet

D-unearned revenue
C-revenue

23
Q

accrued expenses definition + adj entry

A

costs that are incurred but have not been paid for

D-salaries expense
C-salaries payable

24
Q

accrued expenses accounts

A

-salaries payable
-affect the payable

25
Q

accrued revenue defenition + adj entry

A

when you have provided the goods or service but have not received payment

D-accts recievable
C- revenue

26
Q

accrued revenue accounts

A

-accounts receivable

27
Q

Before the adjusting entry for a deferral of an expense, the expenses will be _________ and the assets will be _________

A

understated, overstated

28
Q

deferred expenses is also refered to as

A

prepaid expenses

29
Q

deferred expense definition + adj entry

A

prepayment of assets such as supplies or insaurance that are expensed over time as they are used up

D- supplies expense
C- supplies

30
Q

what acct should be used when a questions states “for which cash will be received in the following period”

A

accounts recievable

31
Q

adjusting entry to reflect expiration of the insurance

A

D- insurance Expense
C- Prepaid Insurance

32
Q

adjusting entry to reflect expiration of supplies

A

D- Supplies Expense
C- Supplies

33
Q

when an asset is expected to last forever- what do we put as they entry

A

no journal entry required

34
Q

Unadjusted trial balance

A

list of ledger accts before adj are recorded

35
Q

adjusted trial balance

A

a list of accs and balances after adjusting entries have been recorded and posted to the ledger

36
Q

closing process

A

occurs at period end after fnan statements have been prepared

-revenues, expenses, dividends reset to 0

37
Q

temporary accounts

A

closed at period end

consists of revenue, expense, dividends, income summary

38
Q

permanent accts

A

not closed at period end-doesnt reset to 0

assets, liability, common stock, and retained earnings

39
Q

income summary account

A

temporary account used only for the closing processes that has a. credit total for revenues and a debit for expenses

40
Q

4 step closing process

A

1-close revenue accs
2-close expense accs
3-close inc summary acc
4-close dividends

41
Q

post closing trial balance

A

a list of all permanent accts and their balances after closing entries

42
Q

current vs long term classification

A

current- to be collected or owed within 1 year

long term- expected after 1 year

43
Q

current assets

A

assets to be sold, collected, or used iwthin one year

ex-prepaid, acc rec

44
Q

long term investments

A

assets to be held for more than 1 year

-ex notes rec, stocks

45
Q

intangiable assets

A

long term assets that lack physical form

ex- trademarks, patents

46
Q

current liabilities

A

liabilities to be paid/settled within 1 ear

ex- accts pay, unearned rec

47
Q

long term liabilities

A

liabilities not due within one year

ex- notes payable, motgage payable

48
Q

new balance sheet layout

A

ASSETS
-current assets
-long term investments
-plant assets

LIABILITIES
-current liabilities
-long term liabilities

EQUITY
-common stock
-retained earnings

49
Q

accrued interest formula

A

principle amt owed X annual interest rate X fraction of year since last payment

50
Q

steps in the closing process

A

1- identify accs for closing
2-record and post closing entries
3-prepare a post closing trial balance

51
Q

what goes in cash vs what goes in accrual

A

cash
- cash received
-cash paid
-prepaid cash

accrual
-earned
-incurred

52
Q

accounting cycle in order

A

1-Analyzing transactions/events

2-Journalizing transactions and events

3-Posting journal entries to the ledger

4-Preparing the unadjusted trial balance

5-Journalizing and posting adjusting entries

6-Preparing the adjusted trial balance

7-Preparing the financial statements

8-Journalizing and posting closing entries

9-Preparing the post-closing trial balance

ACCT203 (10 decks)

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