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Accounting Test 1

Chapters 2 and 3

QuestionAnswer
a balance sheet format that lists assets on the left and liabilities and stockholders' equity on the right account format
an expense or a revenue that occurs before the business pays or receives cash. opposite of deferall accrual
accounting that records the impasct of a business event as it occurs, regardless of whether the transaction affected cash accrual accounting
an expense incurred but not yet paid in cash accrued expense
a revenue that has been earned but not yet received in cash accrued revenue
the cumulative sum of all depreciation expense from the date of acquiring a plant asset accumulated depreciation
a list of all the ledger accounts with their adjusted balances adjust trial balance
the asset's cost minus accumulated depreciation book value (of a plant asset)
accounting that records only transactions in which cash is received or paid out cash-basis accounting
a balance sheet that shows current assets separate from long-term assets, and current liabilites separate from long-term liabilities classified balance sheet
the rpocess of preparing the accounts to begin recording the next period's transactions. Consists of journalizing and posting the closing entries to set the balances of the revenue, expense, and dividends account to zero closing the books
entries that transfer the revenue, expense, and dividends balances from these respective accounts to the retained earnings account closing entries
an account that always has a companion account and whose normal balance is opposite that of the companion account contra account
an asset that is expected to be converted to cash, sold, or consumed during the next 12 months, or within the business's normal operating cycle if longer than a year current asset
A debt due to be paid within one year or withing the entity's operating cycle if the cycle is longer than a year current liability
current assets divided by current liabilities. Measures a company's ability to pay current liabilities with current assets current ratio
ratio of total liabilities to total assets. States the proportion of a company's assets that is financed with debt debt ratio
an adjustment for which the business paid or received cash in advance. Examples include prepaid rent, prepaid insurance, and supplies deferral
allocation of the cost of a plant asset to expense over its useful life depreciation
measure of how quickly an item can be converted to cash liquidity
an asset that is not a current asset long term asset
a liability that is not a current liability long term liability
the basis for record expecses. Direct accountants to identify all expenses incurred during the period, to measure the expenses, and to match them against the revenues earned during that same period matching principle
an income statement that contains subtotals to highlight important relationships between revenues and expenses. multi-step income statement
time span during which cash is paid for goods and services that are sold to customers who pay the business in cash operating cycle
asset, liability, and stockholders' equity accounts that are not closed at the end of the period permanent accounts
long-live assets, such as land, buildings, and equipment, used in the operation of the business. also called fixed assets plant assets
a category of miscellaneous assets that typically expire or get used up in the near future. prepaid expense
a balance-sheet format that lists assets at the top, followed by liabilites and stockholders' equity below report format
the basis for recording revenues, tells accountants when to record revenue and the amount of revenue to record revenue principle
an income statement that lists all the revenues together under a heading such as revenues or revenues and gais. Expenses appear in a separate category call expenses or perhaps expenses and losses single-step income statement
the revenue and expense accounts that relate to a limited period and are closed at the end of the period, such as dividends temporary account
ensure that accounting information is reported at regular intervals time period concept
a liability created when a business collects cash from customers in advance of earning the revenue. The obligation is to provide a product or service in the future. unearned revenue
the record the of the changes that have occured in a particular asset, liability, or stockholders' equity during a period. the basic summary device of accounting account
a liability for an expense that has not yet been paid by the company accrued liability
money and any medium of exchange that a bank accepts at face value cash
list of a company's accounts and their account numbers chart of accounts
the right side of an account credit
the left side of an account debit
the chronological accounting record of an entity's transactions journal
the book of accounts and their balances ledger
copying amounts from the journal to ledger posting
any even that has a financial impact on the business and can be measured reliably. transaction
a list of all the ledger accounts with their balances trial balance
Created by: forevermoody