Slim C: Accrual Accounting

Question 1

Accrual accounting

Answer 1

Records business transactions as they occur, not when cash receipts or payments occur

Question 2

Cash accounting

Answer 2

Records cash transactions only

Question 3

Time-period concept

Answer 3

Makes sure that accounting info is reported regularly by companies. IAS1 - requires financial reports once a year

Question 4

Matching principle

Answer 4

Forms basis for recognising and recording expenses

Question 5

Accounting adjustments 3 categories

Answer 5

Deferrals
Depreciation
Accruals

Question 6

Deferrals

Answer 6

Adjustment needs to be made for item that business has paid or received cash in advance. Decrease asset accounts and increase expense accounts

Question 7

Depreciations

Answer 7

Allocates the cost of an item of PPE to expense over the asset’s useful life. Lower book value of asset

Question 8

Accruals

Answer 8

Records expense before it pays for them. Liability accounts need to be adjusted at the end of the period.

Question 9

Prepaid expenses

Answer 9

Assets. e.g. prepaid rent and supplies

Question 10

Carrying amount

Answer 10

Net amount of PPE. Purchase price - accumulated depreciation expense so far

Question 11

Unearned revenue

Answer 11

Collect cash from customers without earning it

Question 12

Permanent accounts

Answer 12

Assets liabilities and shareholder’s equity