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accnting horngren 3

accounting 1 horngren harrison bamber

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.
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.
Created by: nancygrace