Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

accounting > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

Accounting time periods

A

Genearlly a month, quarter, or a year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Fiscal year

A

An accounting time period that is one year long

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Revenue recognition principle

A

Requires that companies recognize revenue in the accounting period in which it is earned

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Expense Recognition Principle

“Matching principle”

A

Expenses matched with revenues in the period when efforts are expended to generate revenues

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Krispy Kreme

A

Doubled number of donuts to boost quarterly sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Computer Associates International

A

Accused of backdating sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

International note: accural basis

A

Acccrusal basis of accounting is central to all of these standards

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Adjusting entries

A

Ensure that the revenue recognition and expense recognition principles are followed

required every time a company prepares financial statements

Every adjusting entry will include one income statement account and one balance sheet account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

trial balance

A

the first pulling together of the transaction data

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

International note: internal controls

A

Internal controls - system of checks and balances designed to detect and prevent fraud and errors

Foreign companies dont have to follow this in SOX

Unfair advantage because developing internal controls is expensive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

2 types of deferrals

A

Prepaid expenses

Unearned revenues

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Prepaid expenses or Prepayments

A

Expenses that will benefit more than one accounting period as assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Adjusting entry for prepaid expenses

A

An increase (debit) to a expense account

A decrease (credit) to an asset account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Useful life

A

The period of service of an asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Depreciation

A

The process of allocating the cost of an asset to exepnse over its useful life

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Depreciation concept

A

An allocation concept, not a valuation concept

Allocates an asset’s cost to the periods in which it is used

Does not attempt to report the actual change in the value of the asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Contra asset account

A

Accmulated Depreciaition is called this

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Helpful hint: contra assets

A

All contra accounts have increases, decreases, and normal balances opposite to the account to which they relate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Book value

A

The difference between the cost of any depreciable asset and its related accumulated depreciation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Another term for book value

A

Carrying value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Adjustment entry for unearned revenues

A

Results in a decrease (debit) to a liability account

Increase (credit) to a revenue account

22
Q

Accounting for prepaid expenses

A

Ex. insurance, supplies

Reason: prepaid expenses recorded in asset accounts have been used

accounts before adjustment: assets overstated/ expenses understated

Adjusting entry: dr. expenses/cr. assets

23
Q

Accounting for unearned revenues

A

Ex. rent, magazines

reason: unearned revenues recorded in liability have been earned

before adjustment: liabilities overstated/revenues understated

adjusting entry: dr. liablities/ cr revenues

24
Q

Adjustment entry for accrued revenues

A

Increase (debit) to an asset account

Increase (credit) to a revenue account

25
Q

Accounting for accrued revenues

A

Ex. rent, services performed but not collected

reason: revenues have been earned but not yet received in cash or recorded

before adjustment: assets understated/revenues understated

adjusting entry: dr. assets / cr. revenues

26
Q

accrued expenses

A

Expenses incurred but not yet paid or recorded at the statement date

27
Q

Adjusting entry for accrued expenses

A

Results in an increase (debit) to an expense

Increase (credit) to a liability

28
Q

Fannie Mae’s

A

Improper adjusting entries resulted in delayed recognition of expense caused by interest-rate changes

motivation: hit earnings estimates

29
Q

China and accrual accounting

A

switched from cash to accrual accounting to meet a projected budget deficit goal

30
Q

Accounting for acccrued expenses

A

Ex. interest, rent, salries

reason: expenses have been incurred but not yet paid in cash or recorded

before adjustment: expenses understated / liabilities understated

adjusting entry: dr. expenses / cr. liabilities

31
Q

Prepaid expenses (AE)

A

dr. expenses
cr. assets

32
Q

Unearned revenues (AE)

A

dr. liablities
cr. revenues

33
Q

accrued revenues (AE)

A

dr. assets
cr. revenues

34
Q

accrued expense (AE)

A

dr. expenses
cr. liabilties

35
Q

Adjusted trial balance

A

Purpose: prove the equality of the total debit balances and the total credit balances in the ledger after adjustments

Primary basis for the preparation of financial statements

36
Q

How do companies prepare financial statements?

A

Directly from an adjusted trial balance

37
Q

Temporary accounts

A

Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period

38
Q

Permanent accounts

A

Balance sheet accounts whose balances are carried forward to the next accounting period

39
Q

Other term for temporary accounts

A

nominal accounts

40
Q

Other term for permanant accounts

A

Real accounts

41
Q

Closing entries

A

transfer net income and dividends to Retained Earnings, so the balance in Retained Earings agrees with the retained earnings statement

42
Q

Temporary

A

All revenue accounts

All expense accounts

Dividends

43
Q

Permanent

A

All asset accounts

All liability accounts

Stockholders’ equity accounts

44
Q

Post-closing trial balance

A

A list of permanent accounts and their balances after a company has journalized and posted closing entries

45
Q

Income summary

A

A temporary account used in closing revenue and expense accounts

46
Q

Reversing entry

A

An entry made at the beginning of the next accounting period

The exact opposite of the adjusting entry made in the previous period

47
Q

Earnings management

A

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income

48
Q

High Quality of earnings

A

Full and transparent information that will not confus or mislead users of the financial statements

49
Q

One time items

A

Used to prop up earnings numbers

ConAgra foods did this

50
Q

Inflate revenue

A

provide larger incentives for people to buy products to meet goals

Bristol-Myers Squibb did this

51
Q

Improper adjusting entries

A

A way to manage earnings

accounting (31 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions