Module 5- recording transaction

Question 1

cash basis of accounting

Answer 1

recognizes revenues when cash is received and recognizes expenses when cash is paid out

Question 2

accrual basis of accounting

Answer 2

recognizes revenues when sales are made (for example when a product is delivered to a buyer) or services are performed regardless of when the cash is received.
-expenses are recognized are incurred whether or not cash has been paid out under the accrual basis of accounting

Question 3

fiscal year

Answer 3

is any 12 consecutive moths. it may or may not coincide with the calendar year

Question 4

deferred items

Answer 4

consists of adjusting entries previously recorded in accounts:
asset/ expense adjustments;
liability/revenue adjustments
Ex: prepaid rent, prepaid insurance, and supplies on hand

Question 5

depreciation accounting

Answer 5

the process of recording depreciation expense

Question 6

depreciable asset

Answer 6

is a long lived asset such as a building, machine, vehicle, or piece of equipment that provides a service or a benefit for a long period of time. these assets loose value over time

Question 7

Depreciation expense

Answer 7

is the amount of asset cost assigned as an expense to a particular accounting period.

Question 8

3 factors into computing depreciation expenses:

Answer 8

• asset cost: the asset cost is the amount that a company paid to purchased the depreciable asset.
• estimated residual value: the amount the company expects to sell the asset for at the end of its estimated useful life.
• estimated useful life: the amount of time the company expects to use that asset.

Question 9

Straight line depreciation

Answer 9

assigns the same amount of depreciation expense to each accounting period over the life of an asset.

Question 10

Accumulated depreciation account

Answer 10

is a contra asset that shows the total of all depreciation recorded on the asset from the dat of acquisition through the balance sheet date

Question 11

Annual depreciation formula

Answer 11

asset cost-estimated residual value/ Estimated years of useful life.

Question 12

accrued assets

Answer 12

assets such as interest receivable or accounts receivable that have not been recorded by the end of an accounting period.

Question 13

adjustment for accrued items

Answer 13

debit an asset account and credit a revenue account

Question 14

interest revenue adjusting

Answer 14

identify the assets and liabilities account
at the end of an accounting period debits a receivable account(asset) and credits a revenue account to record the interest earned

Question 15

accrued liabilities adjustment

Answer 15

debit expenses and credit accrued expenses or liabilities.

Question 16

accrued items

Answer 16

consists of adjusting entires relating to activity on which NO data has previously been recorded.
consists on 2 types of entries: asset/revenue adjustments and liability /expense adjustments
EX. salaries not yet paid, and services performed but not yet billed