Accruals and Deferrals
This method of accounting follows GAAP, in which revenues are recorded when earned, and expenses are recorded when incurred, regardless of when cash is exchanged.
What is Accrual-Basis Accounting?
These are the three specific categories of temporary accounts that are closed to Retained Earnings at the end of every fiscal year.
What are Revenues, Expenses, and Dividends?
These are the three distinct components that form the Fraud Triangle framework.
What are Opportunity, Motivation, and Rationalization?
To be classified as a cash equivalent on the balance sheet, investments must mature within this timeframe from the date of purchase.
What is three months (90 days)?
These are the three activity classifications presented on the Statement of Cash Flows.
What are Operating, Investing, and Financing Activities?
This is an adjusting entry created when an economic transaction occurs in the current period, but cash will not be exchanged until a future period
This is the trial balance prepared immediately after adjusting entries are posted, which serves as the primary source for constructing financial statements.
What is the Adjusted Trial Balance?
This is the primary leg of the Fraud Triangle that a company's internal control policies are specifically designed to eliminate.
What is Opportunity?
On a bank reconciliation, outstanding checks and outstanding deposits are adjusted on this side.
What is the Bank's Cash Balance (Left) Side?
Cash transactions involving routine revenue collections and expense payments (such as collecting customer payments or paying employee salaries) belong in this cash flow section.
What are Operating Activities?
This is an adjusting entry type where cash is received or paid before the revenue or expense is recognized in the current accounting period.
What is a Deferral (or Prepayment)?
These are the two main objectives of preparing closing entries at the end of an accounting period.
What are transferring temporary balances to Retained Earnings and resetting temporary account balances to zero?
Separation of duties, physical safes, and formal authorization policies fall under this primary category of control activities.
What are Preventive Controls?
This is the initial journal entry required when establishing a petty cash fund.
What is Debit Petty Cash and Credit Cash (checking account)?
Cash purchases or sales of long-term assets, such as equipment, buildings, or land, are classified under this cash flow section.
What are Investing Activities?
This is the specific order of the core accounting cycle steps that follow the initial recording of transactions (3 steps).
What are (1) Record Adjusting Entries, (2) Prepare Financial Statements, and (3) Post Closing Entries?
This equity account represents the accumulation of all past net income minus dividends over the lifetime of the firm, so it is never closed to zero.
What is Retained Earnings?
These are the two major inherent limitations that can allow errors or fraud to occur despite a well-designed system of internal controls.
What are Collusion and Management Override?
This is how an NSF check from a customer would be treated on a bank reconciliation.
What is a deduction on the company side?
Issuing common stock, borrowing from a bank on a long-term note, or paying cash dividends to shareholders belong in this cash flow category.
What are Financing Activities?
Unlike other asset-related expense adjustments, when recording depreciation expense, this specific contra-asset account is credited instead of directly reducing the asset account.
What is Accumulated Depreciation?
These are the only account types that remain with non-zero balances on the Post-Closing Trial Balance.
What are Permanent Accounts (Assets, Liabilities, and Stockholders' Equity)?
The Sarbanes-Oxley Act does not apply to every private business in the U.S., but specifically regulates public companies that file financial statements with this agency.
What is the SEC (Securities and Exchange Commission)?
This is the required journal entry when updating company books for a customer check returned for nonsufficient funds (NSF check).
What is Debit Accounts Receivable and Credit Cash?
The Statement of Cash Flows connects the financial statements by reconciling these two specific balance sheet figures.
What are Beginning Cash Balance (prior year Balance Sheet) and Ending Cash Balance (current year Balance Sheet)?