New Concepts
What is the difference between cash basis accounting and accrual basis accounting?
Cash records when cash is received or when expenses are paid. Accrual is recorded when it is earned or expenses are occurring.
What is a fiscal year?
Is an accounting year of any 12 consecutive months that might not align with the calendar year. This would be something like a school year vs a calendar year.
what sides do credits go on in a T-account?
The left
What are the two different types of adjusting entries?
Deferral is cash first, accruals is expense first then cash. Deferral expense example would be prepaid rent, deferral revenue example would be receiving cash for a job first then doing the job a week later. Accrual expense example would be interest expense for a period before paying the interest; accrual revenue example would be doing a job first then receiving the cash later
Straight line method formula?
=(Cost-Residual value)/Useful life
What side do debits go in in a T-Account
The right
What is an unadjusted trial balance?
lists the revenues and expenses, but these amounts are incomplete because they omit various revenue and expense transactions.
What is book value?
is a depreciable asset’s cost minus accumulated depreciation.
Journalize a cash transaction:
Amazon.com receives $500 in cash for 20 shares of common stock.
Cash would be debited $500 and common stock would be credited $500.
Adjusted trial balance?
includes the balances after posting the adjusting journal entries.
When do you want to recognize expenses?
You would record it when it is incurred. If you pay advance for a month's rent you would not recognize it until you use that month in rent.
Journalize the following:
Amazon takes out a loan of $10,000 for a new building.
Building would be debited $10,000 and accounts payable would be credited $10,000.
What is the difference between adjusted trial balance and an unadjusted trial balance?
An adjusted trial balance is updated on the entries while the unadjusted is not.
When do you recognize revenue?
When it is earned, not when it is received. Such as doing a service then getting paid.
Journalize the entry:
Amazon decides to pay off the building ($10,000) in full by using cash.
Accounts payable would be debited $10,000 and cash would be credited $10,000.