Module 3 Flashcards
What is the period of time financial statements are tied to called?
accounting cycle
What are the four steps of the accounting cycle?
- Record transactions in the accounting record / analyze transactions and prepare (and post) entries
- Prepare (and post) accounting adjustments
- Prepare financial statements
- Close the books (set up for next cycle/period)
What is the FSET?
financial statement effects template
What does the FSET do?
captures the transaction and its effects on the four financial statements
How is the balance sheet broken down on the FSET?
Cash Asset + Noncash Asset = Liabilities + Contributed Capital + Earned Capital
How is the income statement broken down on the FSET?
Revenues - Expenses = Net Income
What is net income tied to on the FSET?
Earned Capital
What is a T-account used for?
to reflect increases & decreases in individual accounts
Which side is increases & which side is decreases in an ASSET T-account?
LEFT = increases (debit)
RIGHT = decreases (credit)
Which side is increases & which side is decreases in a LIABILITIES T-account?
LEFT = decreases (debit)
RIGHT = increases (credit)
Which side is increases & which side is decreases in an EQUITIES T-account?
LEFT = decreases (debit)
RIGHT = increases (credit)
What do journal entries reflect?
increases and decreases to accounts using the language of debits and credits
Give an example(s) of a cash asset on an FSET.
Cash and cash equivalents
Give an example(s) of noncash assets on an FSET.
- Accounts receivable, less allowance
- Acquired intangible assets, net
- Deferred tax assets
- Goodwill
- Inventories
- Long-term marketable securities
- Other current assets
- Property, plant, and equipment (PPE), net
- Short-term investments
- Supplies
- Prepaid expenses
- Long-term investments
- Equipment
- Buildings
- Land
Give an example(s) of liabilities on an FSET.
- Accounts payable
- Accrued expenses
- Unearned revenue
- Bonds payable
- Taxes payable
- Current portion of long-term debt
- Deferred revenue
- Long-term debt
- Other noncurrent liabilities
Give an example(s) of contributed capital on an FSET.
Common stock and additional paid-in capital
Give an example(s) of earned capital on an FSET.
Retained earnings
Give an example(s) of revenues on an FSET.
- Sales revenue
- Fee revenue
- Interest revenue
- Rent revenue
- Service revenue
Give an example(s) of expenses on an FSET.
- cost of sales/COGS
- wages expense
- rent expense
- interest expense
- depreciation expense
- advertising expense
- insurance expense
- repair expense
- income tax expense
- research and development
- selling, general and administrative
Explain accrual accounting
recognizing revenue when products and services are deliveredat an amount expected to be received (even if not received in cash) AND recording expenses when incurred
(accounting adjustments are commonly called accruals)
List the four types of accounting adjustmenst (accruals)
- Prepaid expenses
- Unearned revenues
- Accrued expenses
- Accrued revenues
What do prepaid expenses reflect?
advance cash payments that will ultimately becomeexpenses
An example is the payment for radio advertising that will not be aired until sometime in the future
Whatdo unearned revenues reflect?
cash received fromcustomers before any services or goods are provided
an example is cash received from patrons for tickets to an upcoming concert
What do accrued expenses reflect?
expenses incurred and recognized on the income statement even though they are not yet paid in cash
an example is wages to employees who have performed work but have not yet been paid
