Chapter 8 - Completing The Accounting Cycle Flashcards
What is Accumulated Depreciation?
It is a contra account and carries a credit balance. The difference between the asset account and the Accumulated Depreciation account is the value of the asset.
What I Accrual Accounting?
It is when you attempt to record revenues and expenses when they happen, even if you haven’t received cash or have been paid
What is an adjusting entry?
It is a journal entry that assigns an amount of revenue or expense to the appropriate accounting period; at the same time, it is an entry that brings a balance sheet accounting to it’s true value.
What is a worksheet
It is an informal business paper used to organize and plan the information for the financial statements.
What is a prepaid expense
It is an item paid for in advance, but one where the benefits extend into the future
What are real accounts
They are accounts that have balances that continue into the next fiscal period.
What are nominal accounts
They are accounts that have balances which do not continue into the next fiscal period
What does closing an account mean
It means to cause the account to have no balance
What is an income summary
It is a temporary equity account which is used to record debit and credit amounts during the closing process
What I the Straight-Line Method Of Depreciation
It’s is when you:
Original cost - estimated slave value
——————————————— Estimated number of periods in the life of the asset
What is the Declining-Balance Method of Depreciation
Undepreciated cost of the asset multiply by a fixed percentage
What is depreciation
It is a means of allocating the cost of a long term asset over its useful, productive life. It is sometimes used only for part of a year making further calculation necessary
What is the half-year rule
It is an accounting regulation that allows only 50% of an asset’s cost to be eligible for depreciation in its first year of use
