Chapter 4 Flashcards
What is a temporary/nominal account?
Begin each fiscal period with zero balance
ex. revenue, expenses, drawings
What is a permanent/real account?
Maintains the balance from past fiscal period.
Ex. assets, liabilities, capital
REID stand for?
Revenue, Expenses, Income Summary, Drawings
What is a worksheet?
- To prepare adjusting entries
- Internal document
- not formal
Steps of worksheet
- Enter unadjusted trial balance (first 2 columns)
- Enter adjusting entries (next 2 columns)
- Complete adjusted trial balance by totaling trial and adjustments (in middle 2 cumulous)
- Move balances across worksheet to correct financial statement (income and or balance)
- Total debit and credit columns on all and calculate net income/loss
Assets in order
- Current
- Long term investments
- Property, plant, equipment
- Intangible assets
- Goodwill
L + OE order
- Current
- Long-term
- OE
Long term investments
- Investments in debt or equity are expected to be held for many years
- Cant be converted to cash within 1 year
ex. investment in land for resale
Property, plant, equipment
- Not intended for sale
Ex. land, buildings, equipment, car
Intangible assets
Assets that have no physical substance
ex. Licenses, trademarks, copyrights, patents, goodwill
Goodwill
- Intangible asset
- Arises when company is acquired at a price greater than the fair value of the assets
Current liabilities
- Obligations expected to be settled within a year from fiscal year
- listed in order of maturity
ex. AP, Interest payable, salaries payable, unearned
long term liabilties
obligations to be payed after a year
ex. long-term notes payable, bonds payable, mortgage payable, lease liabilities, deferred income taxes (or future income taxes)
3 Equity, for proprietorship, partnership, corporation
Prop: One capital account - owner’s equity
Partner: Capital account per partner - partner’s equity
Corp: Share capital, retained earnings
IFRS vs ASPE
IFRS: statement of financial position
(uses non-current assets)
ASPE: balance sheet
