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ACCT 1220 > CHAPTER 3 > Flashcards

CHAPTER 3 Flashcards

1
Q

When is the transaction recorded in cash-basis accounting?

A

When currency is exchanged

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2
Q

When is the transaction recorded in accrual accounting?

A

When earned.

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3
Q

What qualifies a transaction as earned?

A

Acquired an asset
Earned revenue
Taken on a liability
Incurred an expense

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4
Q

What is the IFRS definition of REVENUE?

A

The gross inflow of economic benefits during the period.

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5
Q

What is the ASPE definition of REVENUE?

A

A transaction where good have been transfered
The amount of revenue is reliably measured
The customer pays when required

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6
Q

What are examples of adjusting entries?

A

Deferrals
Depreciation
Accruals

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7
Q

What are defferals?

A

Adjusting entries recorded when cash received in advance.

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8
Q

What is depreciation?

A

adjusting entires recorded to show the future benefit declines with age.

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9
Q

What are accruals?

A

Adjusting entries recorded when goods/services are delivered/received in advance.

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10
Q

What is a prepaid expense?

A

An expense a company has paid for in advance.

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11
Q

How is a prepaid expense recorded as when the payment is made?

A

Asset

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12
Q

What qualifies as a deferral?

A

Prepaid rent
Supplies

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13
Q

What is unearned revenue?

A

When a customer pays in advance to receiving good/service

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14
Q

What is unearned revenue recorded as?

A

Liability

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15
Q

Why is unearned revenue recored as a liability?

A

Because they’re required to provide good/service

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16
Q

What are accrued expenses?

A

Unbilled, unpaid expenses

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17
Q

What qualifies as an accrued expense?

A

Salaries
Intrest

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18
Q

What are accrued revenues?

A

Earned revenue they haven’t billed yet or received cash

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19
Q

What qualifies as an accrued revenue?

A

Services
Goods

20
Q

What is a current asset?

A

An asset that can be converted/consumed within 1 period

21
Q

What is a non-current asset?

A

An asset that cant be converted/consumed within 1 period

22
Q

What is a current liability?

A

A liability that is expected to be repaid within 1 period

23
Q

What in a non-current liability?

A

A liability that will be repaid in more than 1 period

24
Q

What is a classified balance sheet?

A

A balance sheet with:
Separate current and non-current assets and liabilities

25
Q

What is an unclassified balance sheet?

A

A balance sheet that doesn’t separate anything

26
Q

Does the IFRS or ASPE use the classified balance sheet?

A

Yes

27
Q

Does the IFRS or ASPE use the unclassified balance sheet?

A

No

28
Q

What is report format?

A

A format where assets, liabilities and shareholders equity are listed in that order

29
Q

What is account format?

A

A format where everything is listed in T-accounts

30
Q

Does the IFRS and ASPE accept report format?

A

Yes

31
Q

Does the IFRS and ASPE accept account format?

A

Yes

32
Q

What does a single step income statement list?

A

All revenues together
All expenses together
Net income

33
Q

What does a multi-step income statement have?

A

Several subtotals

34
Q

What accounts are closed at the end of the period?

A

Revenue
Expenses
Dividends

35
Q

What are temporary accounts

A

Accounts that are closed at the end of the period

36
Q

What accounts are permanent accounts?

A

Assets
Liabilities
Shareholders Equity

37
Q

What are permanent accounts?

A

accounts that carry forward from year to year and becomes beginning balances

38
Q

How do you close accounts?

A

1- Debit revenues
Credit retained earnings for revenue value
2- Credit expenses
Debit retained earnings for expense value
3- Credit dividends
Debit retained earnings for dividend value
4- Post to ledger

39
Q

Does the ending balance in retained earnings have to match the balance reported?

A

Yes

40
Q

What does net-working capital do?

A

It indicates a companies liquidity

41
Q

How do you calculate net working capital?

A

Current assets-current liabilities

42
Q

What does a high net working capital mean?

A

High liquidity

43
Q

What is the current ratio?

A

Current assets/current liabilities

44
Q

What is a high current ratio?

A

Anything above 1.50

45
Q

What is the debt ratio?

A

Liabilities/assets

46
Q

What is a good debt ratio?

A

A low ratio

47
Q

How do you avoid default?

A

Increase sales
Decrease expenses
Sell shares

ACCT 1220 (3 decks)

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