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Resources a business owns that provide future benefits.
What are Assets?
Obligations a business owes to others.
What are Liabilities?
What are Liabilities?
The owner’s claim on the business after debts are paid.
What is Equity?
Revenues minus expenses equals this.
What is Net Income?
Recording revenues when earned and expenses when incurred.
What is Net Income?
Shows revenues and expenses for a period.
What is the Income Statement?
Equation for the balance sheet.
What is Assets = Liabilities + Equity?
Shows how net income and dividends affect equity.
What is the Statement of Retained Earnings?
Cash inflows and outflows appear on this statement.
What is the Statement of Cash Flows?
Reports a company’s financial position at a point in time.
What is the Balance Sheet?
Revenue earned but cash not yet received. What adjustment is needed?
What is to Increase accounts receivable and record revenue.
Expense incurred but not yet paid. What adjustment is needed?
Increase liability (payable) and record expense.
A customer paid $1,000 in advance for services next month. How is this recorded initially?
Record Unearned Revenue (liability ↑); revenue recognized when earned.
Cash is received or paid before revenue/expense is recognized. Example: Prepaid rent or unearned revenue.
What is a deferral/
Record revenues when earned, expenses when incurred.
What is Accrual Basis Accounting
Revenue earned but not yet received in cash.
What is Accrued Revenue:
Match expenses to the revenues they help generate.
What is the matching principle?
Paying rent increases this type of account
What is an increase in an expense.
Business earns $2,500 of service revenue on account. Which accounts change?
What is an increase in AR, revenue, retained earnings, and stockholders' equity.
Paying $2,000 toward a loan affects which accounts?
What are cash, accounts payable. Both accounts decrease.
Net income always increases this account.
What is: Retained Earnings
Statement that shows cash inflows and outflows.
What is The Statement of Cash Flows?
Buying supplies on credit increases this type of account
What is: supplies (increase) and accounts payable (increase)
Providing services increases this account, which also increases equity.
What is Revenue?
Financial Statement with only the date it was prepared on.
What is the balance sheet?