Revenue & Expense Recognition
Revenues should be recognized when this is delivered
What is the good or service?
The normal or natural balance of assets is
What is debit?
Financial statement that reports movement of cash into and out of the corporation during the accounting period
What is the Statement of Cash Flows?
This account is never involved in an adjusting journal entry
What is cash?
This element of the balance sheet is made up of what owners have contributed to the corporation, plus what owners have left in the corporation to continue to grow it
What is SE (CS & RE)?
This basis of accounting for revenues and expenses is NOT permitted under GAAP
What is cash basis?
To increase a liability account, such as Notes Payable, one would:
What is credit?
Also called the P&L, this financial statement reports on revenues generates & the costs to generate them in a given accounting period
What is the income statement?
This adjusting journal entry is made on December 31, 2026 related to the below information:
On Dec 1, 2026 CMC Corp. prepays its insurance premiums for a one year period for coverage from December 2026 through November 2027. The prepaid amount of $24,000 is debited in full to Prepaid Insurance on Dec 1.
What is
Dec 31 AJE
Dr. Insurance Expense 2,000
Cr. Prepaid Insurance 2,000
?
What is Beginning RE
+ NI
- Dividends
= End RE
Regardless of when cash is received, Chipotle should recognize sales revenue when ___
What is the food is provided to the customer?
Doing this would increase the Wage Expense account
What is debiting?
The Income Statement, Balance Sheet, and Statement of Stockholders' Equity each use this basis of accounting for revenues and expenses
What is the accrual basis of accounting?
Starbucks' financial accountants will do this (debit or credit) the Deferred Revenue account when a giftcard is redeemed for a cappucino
What is debit?
This is the purpose of adjusting journal entries
What is to update revenue and expense accounts, to provide an accurate picture of net income for the period?
T/F Macy's orders 1,000 pairs of Levis jeans to sell in its stores. On the date of delivery, Macy's should recognize an expense for the jeans purchase
What is false? Macy's should not recognize an expense until the related revenue is earned when Macy's sells the jeans
Rather than indicating increase or decrease on their own, debit simply means ___ & credit simply means ____
What is debit=left and credit=right?
Is unique in that it is a "financial snapshot" as of a given day, rather than covering an accounting period
What is the Balance Sheet?
This closing entry is made after the preparation of the income statement that reported Sales Revenue of $100, Cost of Goods Sold of $25, and Wage Expense of $35
What is
Dr. Sales Revenue 100
Cr. Cost of Goods Sold 25
Cr. Wage Expense 35
Cr. Retained Earnings 40
?
This tool is used to summarize the effect of many transactions on a given account, in order to calculate the end balance in said account
What is T-account/ledger?
Apple receives a bill for its gas and electric use in its offices. Apple should make this journal entry to record this transaction
What is
Dr. Utilities Expense
Cr. Accounts Payable
This guideline for the natural balance of different types of accounts tells us (fill in the blank:left/right):
Accounts on the left side of basic acct eq increase on the ____ and accounts on the right side of the basic acct eq generally increase on the ____
What is accounts on the left side of basic acct eq increase on the left (dr) and accounts on the right side of the basic acct eq generally increase on the right (cr)
[exception to rule: Expense & Dividends increase with dr]
Financial statement that reports on the resources of the company & the sources of financing for those resources
What is the Balance Sheet?
What is
Dr. Prepaid Rent (+A)
Cr. Cash (-A)
&
Dr. Rent Expense (+E, -NI, -RE, -SE)
Cr. Prepaid Rent (-A)
The set of rules for American companies is called this while the set of rules many international countries' companies use is called IFRS
What is GAAP?