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Flap 2 |
| ACCRUAL ACCOUNTING | Accounting that records the impact of a business event as it occurs, regardless of wheter the transaction affected cash. |
| ACCRUED EXPENSE | An expense that the business has incurred but not yet paid. (taxes) |
| ACCRUED REVENUE | A revenue that has been earned but not yet collected in cash. (commissons,) |
| ACCUMULATED DEPRECIATION | The cumulative sum of all depreciation expense recorded for an asset. |
| ADJUSTED TRIAL BALANCE | A list of all the accounts with their adjusted balances. |
| ADJUSTING ENTRY | Entry made at the end of the period to assign revenues & expenses to the period they are earned or incurred. Adj. entries help measure the period's income and bring the related asset and liability accounts to correct bal. for the financial statements. |
| BOOK VALUE(of a Plant Asset) | The asset's cost minue accumulated depreciation |
| CASH-BASIS ACCOUNTING | accounting that records transactions only when cash is recived or paid |
| CONTRA ACCOUNT | An account that always has a companion account and whose normal balance is opposite that of the companion account |
| DEPRECIATION | The allocation of a plant asset's cost to expense over it useful like. |
| MATCHING PRINCIPLE | Guide to accounting for expenses. Identify all expenses incurred during the period, measures the expenses, and match them against the revenues earned during that same time period. |
| PLANT ASSET | Long-lived tangible assets-such as land, buildings, and equipment-used in the operation of a business |
| PREPAID EXPENSE | Advance payments of expenses. Examples include prepaid rent, prepaid insurance and prepaid supplies. |
| REVENUE PRINCIPLE | The basis for recording revenues; tells accountants when to record revenue and the amount of revenue to record. |
| TIME-PERIOD CONCEPT | Ensures that information is reported at regular intervals. |
| UNEARNED REVENUE | A liability created when a business collects cash from customers in advance of doing work. Also call Deferred revenue |
| DEFERRED REVENUE | A liabilty created when a business collects cash from customers in advance of doing work. Also called Unearned Revenue. |
| prepaid | CASH OCCURS BEFORE EXPENSE |
| accrual | EXPENSE OR REVENUE OCCURS BEFORE CASH |
| Types of adjusting journal entries | Prepaid Exp.,Depreciation, Accrued Expense(liability), Accrued Rev.(asset), Unearned Revenue. |
| Adjusting journal entries
PREPAID EXPENSE 1) | Asset that will be used up in the future(Prepaid Rent, Supplies, Ins.)
The prepaid account like supplies when purchased is an asset. Really this asset is an expense in disguise, it does not convert to an expense until the period it is used up. |
| Adjusting journal entries
DEPRECIATION(2) | Expensing of plant assets occurs, however the plant asset account is not reduced as w prepaids. A Contra account is used. When the adjusting entry is prepared to reduce the plant assets it would be credited to accumulated depreciation account(contra) |
| adjusting journal entries
ACCRUED EXPENSE(liability) (3) | Expense incurred before the cash is paid. Accrued Liability is an expense that has been incurred but not yet paid and is not an Accounts Payable.
Salary Exp Debit
Salary Payable or Accrued Salary Expense Credit
earned in dec being paid in jan |
| Adjusting journal entries
ACCRUED REVENUES (4)
| Accrued Rev.(assets) earn rev. before receive cash and is not recorded in A/R yet.
Contractor build home 12/31 only half way done
Accnts Recv. or Accrued Revenue Debit half$
Service Rev Credit half $ |
| Adjusting journal entries
UNEARNED REVENUE (5) | Received cash before providing service or product
The unearned revenue is a liabilty since it is due to a client or customer.
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