Module 2 Flashcards
Cash Accounting
Revenue is recorded only when the cash is received and expenses are recorded when cash is paid.
Accrual Accounting
Recognize revenue when it is “earned” and recognize expenses in the period incurred, without regard to the time of the receipt or payment of cash.
Accrual Revenue
When “earned”
Accrual Expense
When “incurred” (or “matched” with revenue)
What are assets?
Economic resources that are expected to help generate future cash inflows or reduce or prevent future cash outflows and owned/controlled by the company
What are liabilities?
Economic obligations of the organization to outsiders, or claims against its assets by outsiders.
What is equity?
Residual interest in assets after deducting liabilities
What is working capital?
Current assets - current liabilities
What is income?
Revenue - Expenses, does NOT equal cash and is a measurement of performance
What are revenues?
Increases in assets or decreases in liabilities received in exchange for the delivery of goods or services to customers.
What are expenses?
Decreases in assets or increases in liabilities that arise because goods or services are delivered to customers.
What are the five elements of accounting?
Assets, liabilities, owner’s equity, revenues, expenses
