Activity has occurred but no cash transactions yet

Performed service but not yet paid for it (debit: accounts receivable, credit: revenue)

Expense incurred but not yet paid for (debit: expense account, credit: payable)

Cash paid up front but no activity has occurred yet

Paid in advance for future services (debit: unearned revenue, credit: revenue)

Paid in advance for future incurred costs (debit: expense account, credit: prepaid)

Income Statement (Revenue, Expenses, Net Income or Loss)/Revenue

Physical resources that are owned and used by a business and are permanent or have a long life (property, plant, equipment)

Decrease in usefulness (all fixed assets except land depreciate)

Accumulated depreciation accounts

Cash and other assets expected to be converted to cash, sold, or used up in 1 year or less

Liabilities that'll be due within 1 year or less; to be paid out of current assets

Long-term Liabilities:

Liabilities not due for usually more than 1 year

"Year to Year" Accounts (Balance Sheet)

Report amounts only good for one period; should have zero balances at the beginning of next period (Income Statement)

Debit each revenue account for its balance, credit each expense account for its balance, debit (net loss) or credit (net income) retained earnings

Debit: retained earnings, credit: dividends

Working Capital = Current Assets - Current Liabilities

Current Ratio = Current Assets/Current Liabilities

Ability of a business to pay its debts

Where are adjusted entries posted?

General ledger; create an adjusted trial balance

Analyze - Journalize - Post - Unadjusted Trial Balance - Adjustments - Adjusted Trial Balance - Financial Statements - Close - Post Closing Trial Balance

Cash Basis of Accounting:

Records transactions only when cash is paid or received

Accrual Basis of Accounting:

Uses revenue and expense recognition principles to record revenues and expenses (GAAP)

Adjusted Trail Balance:

Unadjusted Trial Balance + Accruals and Deferrals (ex. Accumulated Depreciation)

Closing Trial Balance:

Trial Balance without Income Statement Accounts (Revenue and Expenses)

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Chap 3/4 Acc

Question	Answer
Accruals:	Activity has occurred but no cash transactions yet
Revenue Accural:	Performed service but not yet paid for it (debit: accounts receivable, credit: revenue)
Expense Accrual:	Expense incurred but not yet paid for (debit: expense account, credit: payable)
Deferrals:	Cash paid up front but no activity has occurred yet
Unearned Revenue:	Paid in advance for future services (debit: unearned revenue, credit: revenue)
Prepaid Expenses:	Paid in advance for future incurred costs (debit: expense account, credit: prepaid)
Vertical Analysis:	Income Statement (Revenue, Expenses, Net Income or Loss)/Revenue
Fixed/Plant Assets:	Physical resources that are owned and used by a business and are permanent or have a long life (property, plant, equipment)
Depreciation:	Decrease in usefulness (all fixed assets except land depreciate)
Contra Accounts:	Accumulated depreciation accounts
Current Assets:	Cash and other assets expected to be converted to cash, sold, or used up in 1 year or less
Current Liabilities:	Liabilities that'll be due within 1 year or less; to be paid out of current assets
Long-term Liabilities:	Liabilities not due for usually more than 1 year
Permanent Accounts:	"Year to Year" Accounts (Balance Sheet)
Temporary Accounts:	Report amounts only good for one period; should have zero balances at the beginning of next period (Income Statement)
Closing Entry 1:	Debit each revenue account for its balance, credit each expense account for its balance, debit (net loss) or credit (net income) retained earnings
Closing Entry 2:	Debit: retained earnings, credit: dividends
Working Capital:	Working Capital = Current Assets - Current Liabilities
Current Ratio:	Current Ratio = Current Assets/Current Liabilities
Liquidity:	To convert assets to cash
Solvency:	Ability of a business to pay its debts
Where are adjusted entries posted?	General ledger; create an adjusted trial balance
Accounting Cycle:	Analyze - Journalize - Post - Unadjusted Trial Balance - Adjustments - Adjusted Trial Balance - Financial Statements - Close - Post Closing Trial Balance
Cash Basis of Accounting:	Records transactions only when cash is paid or received
Accrual Basis of Accounting:	Uses revenue and expense recognition principles to record revenues and expenses (GAAP)
Adjusted Trail Balance:	Unadjusted Trial Balance + Accruals and Deferrals (ex. Accumulated Depreciation)
Closing Trial Balance:	Trial Balance without Income Statement Accounts (Revenue and Expenses)

Created by: IanMcCormick20

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