Exam 3 Study Topics Flashcards
How are accounts receivables created?
When something is sold and the customer is extended a credit (says they will pay later)
Why can you not use the direct write-off method?
it does not record expenses in the same period as the related revenue, leading to inaccurate financial reporting; aka Matching Principle (requires companies to record expenses in the same period as the revenues they generate)
What is the purpose of asset capitalization?
to record the cost of acquiring or improving a long-term asset on the balance sheet, spreading its expense over its useful life to match revenue generation and improve financial accuracy
What are some examples of intangible assets?
Patents, Copyrights, Goodwill, Franchises, Trademarks
How are natural resource costs allocated?
Depletion; allocating the cost of a natural resource, such as oil or timber, over the period of time that the resource is exploited or used up
Bonds definition and characteristics
Written promise to pay
Multiple parties to whom you owe money to; Sold to investors
Bonds components
-Amount on the bond/Specific Principal Amount= Face Value or Par Value
-Rate on the bond/Specific Interest Amount/Rate= Stated Rate
Bonds benefits
-Bonds do not affect owner control
-Interest on bonds is tax deductible
Gain on Disposal/Sale
Revenue; Credit
Loss on Disposal/Sale
Expense; Debit
Depletion Expense
Expense; Debit
Accumulated Depletion
Contra-Asset; Credit
Repairs and Maintenance Expense
Expense; Debit
Allowance for Bad Debts
Contra-Asset; Credit
Bad Debts Expense
Expense; Debit
