General
This principle requires expenses to be recorded in the same period as revenue earned
What is the matching principle?
Amounts owed but not yet paid to employees for services they have already performed
What is Salaries Payable?
Prepaid expenses are initially recorded as this type of account on the balance sheet.
What is "asset"?
She had millions in unearned revenue before she started the ERA tour.
Who is Taylor Swift?
This is the process of allocating the cost of an asset over its useful life.
What is "depreciation"?
Concurrent representation of several financial statements horizontally across a page.
What is Horizontal financial statement model?
A customer pays $1,200 in advance for a service. After two months, $400 has been earned.
What is the adjusting entry called a deferral?
This prepaid expense commonly involves payments for insurance policies.
What is "prepaid insurance"?
This is recorded when a company receives cash but has not yet delivered goods or services.
What is "unearned revenue"?
This type of asset, like machinery or vehicles, decreases in value over time.
What is a "fixed asset"?
This type of accounting is the opposite of cash accounting, where transactions are recorded only when cash is exchanged.
What is accrual accounting?
Statement that summarizes the transactions that affected the owners’ equity during the accounting period.
What is the statement of changes in stockholders' equity?
Prepaid expenses are gradually recognized as this type of account over time.
What is an expense?
Unearned revenue is initially recorded as this type of account on the balance sheet.
What is "liability"?
This method of depreciation spreads the asset’s cost evenly each year.
What is "straight-line"?
Standardized rules and procedures used in the United States for preparing and presenting financial statements
What is GAAP (Generally Accepted Accounting Principles)?
Financial statements may misrepresent profitability
What is the consequence of failing to follow the matching principle which requires adjusting entries?
This financial statement shows the reduction of prepaid expenses over time.
What is the income statement?
As the company fulfills its obligations, unearned revenue is reclassified into this account.
What is "revenue"?
This term refers to the period during which an asset can be used before it loses its value.
What is a "useful life"?
Financial statement that reports a company’s assets and the corresponding claims (liabilities and equity) on those assets as of a specific date (usually as of the end of the accounting period).
What is the Balance Sheet?
Net income is understated without this adjustment
What is the effect on the income statement when a company fails to adjust for unearned revenue that has now been earned?
They have prepaid tuition revenue at the beginning of the semester
Who are the students?
This industry commonly uses deferred revenue for annual subscription payments.
What are "subscription-based services" such as Netflix and Hulu?
This term refers to the asset's value after depreciation has been applied.
What is "book value"?