Chapter 3 Flashcards
Prepaid Expenses
pay cash for an asset that will be an expense in a future period
Deferred Revenue
receives cash now that will be revenue in a future period
Accrued Expense
recorded expense today that will be paid in cash in a future period
Accrued Revenues
recorded as revenue today and will be collected in cash in a future period
Operating Cycle
the time it takes to provide a service and then collect the cash
Classified Balance Sheet
asset and liability accounts are ground into current and long-term categories
Temporary Accounts
kept for each period and then transferred to the retained earnings account
Permanent Accounts
balances are carried forward from period to period
Closing Entries
transfer the balances of all temp accounts to the RE account
Post-Closing Trial Balance
list of all accts. and their balances at a particular date after they’ve been updated for closing entries
Adjusting Entry for Accrued Revenue
debit to asset acct (increase in asset)
credit to revenue acct (increase in revenue)
Adjusting Entry for Accrued Expense
debit to expense acct (increase in expense)
credit to liability acct (increase in liability)
Adjusting Entry for Deferred Revenue
debit to liability acct (decrease in liability)
credit to revenue acct (increase in revenue)
Adjusting Entry for Prepaid Expense
debit to expense acct (increase in expense)
credit to asset acct (decrease in asset)
Contra Account
an acct with a balance that is opposite to its normal related account (ex. Accumulated Depreciation is a contra asset with a normal credit account)
