Chapter 4- Accrual Accounting Concepts

Question 0

Requires that companies recognize revenue in the accounting period in which the performance obligation is satisfied

Answer 0

Revenue recognition principle

Question 1

An assumption that the economic life of a business can be divided into artificial time periods

Answer 1

Periodicity assumption

Question 2

When a company agrees to perform a service or sell a product to a customer

Answer 2

Performance obligation

Question 3

Principle that dictates that efforts(expenses) be matched with results (revenues)

Answer 3

Expense recognition principle

Question 4

Accounting basis in which companies record, in the periods in which the events occur, transactions that change a company’s financial statements, even if cash was not exchanged.

Answer 4

Accrual-basis accounting

Question 5

Expenses incurred but not yet paid in cash or recorded

Answer 5

Accrued expenses

Question 6

Revenues for services performed but not yet received in cash or recorded

Answer 6

Accrued revenues

Question 7

A list of accounts and their trial balances after all adjustments have been made

Answer 7

Adjusted Trial Balance

Question 8

Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed

Answer 8

Adjusting Entries

Question 9

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

Answer 9

Book Value

Question 10

Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash

Answer 10

Cash-basis accounting

Question 11

Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholder’s equity account, Retained Earnings.

Answer 11

Closing Entries

Question 12

An account that is offset against an asset account on the balance sheet

Answer 12

Contra asset account

Question 13

The process of allocating the cost of all assets to expenses over its useful life

Answer 13

Depreciation

Question 14

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

Answer 14

Earnings Managment

Question 15

An accounting period that is one year long

Answer 15

Fiscal Period

Question 16

A temporary account used in closing revenue and expense accounts

Answer 16

Income Summary

Question 17

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

Answer 17

Permanent accounts

Question 18

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

Answer 18

Post-closing Trial Balances

Question 19

Expenses paid in cash before they are used or consumed

Answer 19

Prepaid expenses

Question 20

Indicates the level of full and transparent information that a company provides to users of its financial statements

Answer 20

Quality of Earnings

Question 21

an entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period

Answer 21

Reversing entry

Question 22

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

Answer 22

Temporary accounts

Question 23

Cash received and a liability recorded before services are preformed

Answer 23

Unearned Service Revenue

Question 24

The Length of service of a productive asset

Answer 24

Useful life

Question 25

A multiple-column form that companies may use in the adjustment process and in preparing financial statements

Answer 25

Worksheet