Chapter 4 - adjustments Flashcards
Define adjustments
- entries made a the end of every accounting period to report revenues and expenses in the proper period
- and assets and liabilities at appropriate amounts
What is an accrual adjustment?
1) used to record revenue or expenses when they occur prior to receiving/paying cash - must adjust corresponding balance sheet account
2) involves 1 asset + 1 rev, or 1 liability + 1 expence
What is a deferral adjustment?
1) used to lower balance sheet accounts and increase corresponding income statement accounts
2) involves 1 asset + 1 expense or 1 liability + 1 revenue
What is the accounting cycle steps?
1) analyze transactions
2) record journal entries to gen. journal
3) post to gen. ledger
4) unadjusted trial
5) prepare and post adjusting journal entries
6) adjusted trial balance
7) financial statements
8) record and post closing entries
9) prepare post-closing trial balance
Define depreciation.
- the process of allocating the cost of long lived assets to the accounting periods in which they are used.
Define contra-account.
- an account that is an offset to, or reduction of, another account.
Define residual value.
- an estimate of what item can be sold at
- this amount is not depreciated
What is the journal entry for depreciation?
debit- depreciation expense
credit- accumulated depreciation
What are the temporary accounts?
Revenue
Expenses
Dividends
- accounts that track results for limited period of time
Define adjusted trial balance
- a list of all accounts with their adjusted balances
- to check on the equality of debits and credits
Define post closing trial balance
- an internal report prepared as the last step in accounting cycle
- to check debit=credit, and all temporary accounts have been closed
Define adjusting journal entries
- record the effects of each periods adjustments in a debit=credit format
Define permanent account
- an account that tracks financial results from year to year
- carries ending balance into next year
