RANDOM
owner's claim on assets
Equity
Revenues are recorded when cash is received and expenses are recorded when cash is paid
Cash basis accounting
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BASIC ACCOUNTING FORMULA:
ASSETS = LIABILITIES + EQUITY
Another term for Deferred Revenue
Unearned Revenue
Revenues are recorded when products or services are delivered, and records expenses when incurred
Accrual Basis Accounting
cost incurred in a period that are both unpaid and unrecorded
Accrued Expense
Prepaid Insurance Adjustment:
DR Insurance Expense
CR Prepaid Insurance
Current Ratio Formula:
Current Assets / Current Liabilities
Assets sought to be used within one year...
Current Assets
An accounting period separated into 4 parts of one year
Quarterly Accounting Period
long-term assets that benefit business operations but lack physical form
Intangible Assets
Supplies adjustment:
DR Supplies Expense
CR Supplies
Profit Margin Formula:
Net Income / Net Sales = Profit Margin
Revenue is recorded when the goods or services are given to customers at the expected amount.
Revenue Recognition Principle
Last account closed on the 4-step closing process
Dividends
1. Credit Balances 2. Debit Balances 3. Income Summary 4. Dividends
What kind of accounts are Assets, Liabilities, Common Stock, and Retained Earnings?
(not closed at the end of a period.)
Permanent Accounts
Unearned/Deferred Revenue adjustment:
DR Unearned/Deferred Revenue
CR Service Revenue
Net Cost Formula:
Original Cost - Salvage Value
Assets that are used over one year or longer
Long-term Assets
Allocating the cost of a plant assets' useful life is called....
Depreciation
What kind of accounts are Revenues, Expenses, Dividends, and Income Summary.
(closed at the end of a period.)
Temporary Accounts
Depreciation adjustment:
DR Depreciation Expense
CR Accumulated Depreciation
Straight Line Depreciation Formula:
(Asset Cost - Salvage Value) / useful life
Tangible or long-lived assets that are used to produce products and services
Plant Assets