Chapter 3 Flashcards
When should we record revenue?
When it is earned, not necessarily in the period in which we receive cash
When should we record expenses?
Recognize expenses in the same period as the revenues they help generate
When do we recognize revenue in a service enterprise?
When the service is actually performed
What accounts do you need to close out Dec 31st?
Revenue, expenses and dividends
What is net income equation?
Revenue minus expenses, cost of goods sold and taxes
HWYR - prepaid insurance?
Prepaid insurance asset debit, cash credit
HWYR - prepaid insurance after 1 month?
Debit expense account for that amount, credit “prepaid insurance” asset
What is the equation for net revenue?
Company’s total revenues minus discounts, returns, and allowances
What are sales discounts, and where is it recorded? ?
Are terms for payment (2/10, n/30) and are entered as debits
What are sales returns and allowances, and how are they recorded?
They are for unsatisfactory or damaged merchandise, recorded as debits
If discounts, returns and allowances are recorded as debits, what is recorded as credits?
Accounts Receivable
After you calculate the estimate of bad debt, where do you put it?
Under “Bad Debt Expense” debit and Allowance for Uncollectible Accounts
At the end of the year, what does Allowance for uncollectible accounts end up getting zeroed out for
It switches over to debit of Bad debt expense
What type of notes are considered current assets?
Notes due within 1 year, any longer than that are long-term receivables
Bank reconciliation - where does changes go?
Added? Debit cash
Subtracted? Credit cash
