Chapter 3 Flashcards
Accrual Basis of accounting
Revenues & expenses reported in the same period as preformed
Cash Basis of Accounting
Revenues and expenses are reported WHEN cash is revived.
Adjusting Process
Updating of accounts at end of period before financial statements are prepared.
Adjusting Entries
Entries bringing accounts up-to-date at end of period.
Accruals & Deferrals
2 account Types Requiring Adjustments
Accruals
Deferrals
Accruals
UN-PAID revenues earned.
UN-PAID expenses recorded
Deferrals
“Unearned revenue” recorded as liability or asset.
Prepaid Expense
An Asset
Cash paid for a future expense.
2 Uses for
Revenue Recognition
&
Expense Recognition
1) Properly reported net earnings on “income Statement” for period.
2) Match revenues and expenses.
Necessities of Adjustment’s
Expenses…Supplies small daily amounts used.
Revenues…advance “unearned-rent”
Unrecorded events
Adjusting Entries affect?
At least one income Statement & one balance sheet.
Abbreviation for Credit
Cr.
Abbreviation for Debit
Dr.
Accumulated depreciation
Total depreciation since the acquisition of an asset
Contra Accounts
Or
Contra Assets Accounts
Accumulated Depreciation Account
