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ACCT 2401 T1 Ch3
Information from Chapter 3 on Test 1 Review Sheet
| Question | Answer |
|---|---|
| accrual accounting vs. cash based accounting | recognize business event when it occurs vs. recognize event when cash received/paid |
| deferred expense | prepaid expenses are payments in advance for items to be used later (rent, insurance) |
| deferred revenues | unearned revenues are rev received in advance, will be earned later Ex: On Dec. 20, receive $200 for work that will be done on Jan. 10 (deposit on photo selling) or Ex: Rent received in advance for 1 period, but not really earned until the next period |
| accrued expenses | accrued liability. accrued expenses are expenses that are incurred in one period, paid in another Ex: Worker who helped. you owe $100; will pay 1/5 |
| accrued revenues | accrued asset/accrued revenue is revenue that has been earned, but not received Ex: AR Christmas shoot for church pageant (Dec. 22). Cost the customer $300, they will pay on 1/18. |
| depreciation | Depreciation is the allocation of cost of the asset over the asset life (more later in chapter 9) Book value of asset is = cost – accumulated depreciation (all depreciation to date) |
| effects of not recording AJEs | If adjustments are omitted then the revenues and/or expenses will not be correctly recorded. Therefore Net income will either be over or under stated, which means all the financial statements would be incorrect. |
Created by:
chellejenkins
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