Characteristics
Characteristic of being free from bias
What is neutrality?
Assumption that states that financial statement elements should be measured in a particular monetary unit (in the United States, the U.S. dollar).
What is the monetary unit assumption?
The first step of the accounting process
What is obtaining information about external transactions from source documents?
$200 received for services performed
Dr. $200 Cash
Cr. $200 Service Revenue
A present right to an obligation
What are assets?
Characteristic of including all information necessary for faithful representation.
What is completeness?
Assumption that allows the life of a company to be divided into artificial time periods to provide timely information.
What is the periodicity assumption?
What do we do after we finish posting from the journal to general ledger accounts?
What is preparing an unadjusted trial balance?
Prepaid two years of rent for $2,000
Dr. $2,000 Prepaid Rent
Cr. $2,000 Cash
A present obligation of an entity to transfer an economic benefit
What are liabilities?
This fundamental qualitative characteristic makes financial information pertinent to decision-making.
What is relevance?
Assumption that states in the absence of information to the contrary, it is anticipated that a business will operate indefinitely.
What is the going concern assumption?
A collection of accounts that organizes the accounts and allows for keeping track of increases and decreases and resulting balances.
What is a general ledger?
$500 of supplies used up
Dr. Supplies Expense $500
Cr. Supplies $500
Residual interest of assets after being deducted by liabilities
What is equity?
Characteristic of information helping users see similarities and differences among events and conditions.
What is comparability?
Cost measurement that estimates selling prices of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
What is Net Realizable Value (NRV)?
What are the internal transactions recorded at the end of any period when financial statements are prepared.
What are adjusting entries?
Sold a $250 gift card
Dr. Cash $250
Cr. Unearned Revenue $250
Decreases in equity (net assets) from transactions and other events and circumstances affecting an entity except those that result from expenses or distributions to owners
What are losses?
considers if different knowledgeable and independent measures would reach consensus about whether information is representationally faithful.
What is verifiability?
Cost measurement that is based on the amount given or received in the original exchange transaction.
What is historical cost?
The accounts that are closed to retained earnings at the end of fiscal year
What are revenues and expenses?
Earned $100 of interest on a note but have not yet received the cash.
Dr. Interest Receivable $100
Cr. Interest Revenue $100
Beginning Retained Earnings + Net Income - Ending Retained Earnings = ???
What are dividends?