Principles & Assumptions
Terms
Depreciation
Types of Adjusting Entries
Journal Entry
100
The assumption that requires the items on the financial statements to be measured in terms of a monetary unit.
What is the Monetary Unit Assumption?
100
Accounting method that records revenue only when cash is received and expenses only when cash is paid.
What is Cash Basis Accounting?
100
The process by which businesses spread the allocation of a plant asset's cost over its useful life.
What is Depreciation?
100
Paid six months of rent, $6000
What is a Prepaid Expense?
100
On April 1, ABC prepaid six months of rent, $6,000. Adjusting entry required at April 30.
What is debit Rent Expense $1,000; credit Prepaid Rent $1,000?
200
A principle that states that acquired assets and services should be recorded at their actual cost.
What is the Cost Principle?
200
Accounting method that records revenues when earned and expenses when incurred.
What is the Accrual Basis Accounting?
200
A depreciation method that allocates an equal amount of depreciation each year.
What is Straight-Line depreciation?
200
Received $2,500 from a customer for a five-month service agreement.
What is Unearned Revenue?
200
Beginning balance of supplies account is $500. During the month, purchased $200 of supplies. $300 supplies are on-hand at month end. Adjusting journal entry required at month end.
What is debit Supplies Expense $400; credit Supplies $400.
300
Assumes that the entity will remain in operation for the foreseeable future.
What is the Going Concern Assumption?
300
Assumes that a business's activities can be sliced into small times segments and that financial statements can be prepared for specific periods, such as a month, quarter or year.
What is Time Period Concept?
300
The sum of all the depreciation expense recorded to date for a depreciable asset.
What is Accumulated Depreciation?
300
Work performed but not yet billed to your customer, $1,000
What is Accrued Revenue?
300
January 1, purchased truck for $10,000 that is expected to be useful for 5 years with a $1,000 salvage value. Adjusting entry required at the end of January.
What is debit Depreciation Expense $150; credit Accumulated Depreciation $150?
400
Requires companies to record revenue when it has been earned and determines the amount of revenue to record.
What is the Revenue Recognition Principle?
400
An expense that the business has incurred but not yet paid.
What is an Accrued Expense?
400
A depreciable asset's cost minus accumulated depreciation.
What is Book Value (Net Book Value)?
400
Employees' time worked the last week of the month, to be paid next month
What is Accrued Expense?
400
Golf Today collects cash $360,000 from subscribers in advance and then mails the magazines to subscribers over a one-year period. Adjusting entry required after the first month.
What is debit Unearned Revenue $30,000; credit Subscription Revenue?
500
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.
What is Matching (Expense) Recognition Principle?
500
A revenue that has been earned but for which cash has not yet been collected.
What is Accrued Revenue?
500
An account that is paired with, and is listed immediately after, its related account and whose normal balance is the opposite of the related account.
What is a Contra Account?
500
Purchased a new truck, $25,000
What is Depreciation?
500
ABC Company has a weekly payroll of $20,000. Month end falls on Wednesday. Adjusting entry required at month end.
What is debit Wages (Salary) Expense $12,000; credit Wages (Salary) Payable $12,000?
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