The Accounting Cycle, Adjusting Entries and Depreciation Flashcards
What are the five steps to the accounting cycle?
Analyze, Record, Adjust, Report, Close
Which parts of the accounting cycle happen continuously?
the first two (Analyze and Record)
Which parts of the accounting cycle happen at the end of the period?
the last three (Adjust, Report and Close)
Why do we use adjusting entries?
In order to maintain the standards of accrual accounting
When is an adjusting entry performed?
At the end of the period
With deferred / unearned revenue, the _________ comes before the ____________, and we are ___________ money.
cash, recognition, gaining
With prepaid expenses, the _________ comes before the ____________, and we are ___________ money.
cash, recognition, losing
With accrued revenue, the _________ comes before the ____________, and we are ___________ money.
recognition, cash, gaining
With accrued expense, the _________ comes before the ____________, and we are ___________ money.
recognition, cash, losing
What is the process of allocating a tangible asset’s cost to expense over time?
depreciation
What is the equation for straight-line depreciation?
annual depreciation expense =
(asset cost – salvage value) / (useful life)
For long-term assets, you can mark it as a _______ _____________ account, also called a _______ ________.
accumulated depreciation, contra asset
Adjusting entries almost never affect your ______.
cash
(Of the four types of adjusting entries), insurance, airlines and gift cards (as the company) are all examples of what?
deferred / unearned revenue
(Of the four types of adjusting entries), prepayment of airline tickets, insurance, magazine subscriptions, rent are all examples of what?
prepaid expenses
