Chapter 3: The Adjusting Process

Scott Gottstein
Flashcards by , created about 1 year ago

Finance Flashcards on Chapter 3: The Adjusting Process, created by Scott Gottstein on 06/26/2018.

Scott Gottstein
Created by Scott Gottstein about 1 year ago
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Question Answer
Accounting method that records revenues only when cash is received and expenses only when cash is paid Cash Basis Accounting
Accounting method that records revenues when earned and expenses when incurred Accrual Basis Accounting
Assumes that a business's activities can be sliced into small time segments and that financial statements can be prepared for a specific period, such as a month, quarter or year Time Period Concept
An accounting year of any 12 consecutive months that may or many not coincide with the calendar year Fiscal Year
Requires companies to record revenue when (or as) the entity satisfies each performance obligation Revenue Recognition Principle
Guides accounting for expenses, ensures that all expenses are recorded when they are incurred during the period and matches those expenses against the revenues of the period The Matching Principal
An entry made at the end of the accounting period that is used to record revenues to the period in which they are earned and expenses to the periond in which they occur Adjusting Entries
Cash payment occurs before an expense is incurred or the cash receipt occurs before the revenue is earned Deferral
Records an expense before the cash is paid or records revenue before the cash is received Accrual
An asset created when a business makes advance payments of future expenses Deferred Expense
A liabilitiy created when a business collects cash from customers in advance of completing a service or delivering a product Deferred Revenue
An expense that the business has incurred but has not yet paid Accrued Expense
A revenue that has been earned but for which the cash has not yet been collected Accrued Revenue
Long lived, tangible assets, such as land, buildings and equipment used in the operations of a business Property, Plant and Equipment
The process by which businesses spread the allocation of a plant assets cost over it's useful life Depreciation
The expected value of a depreciable asset at the end of its useful life Residual Value
A depreciation method that allocates an equal amount of depreciation each year (Cost - Residual Value) / Useful Life Straight Line Method
The sum of all depreciation expense recorded to date for a depreciable asset Accumulated Depreciation
An account that is paired with and is listed immediately after its related account, in the chart of accounts and associated financial statement, and whose normal balance is the opposite of the normal balance of the related account. Contra Account
A depreciable assets cost minus accumulated depreciation Book Value
A list of all accounts with the adjusted balances Adjusted Trial Balance
An internal document that helps summarize data for preparation of financial statements. Worksheet