Closing the Books
The 3 Accounts that must be closed at the end of the period.
What are revenue, expenses, and dividends?
When is revenue recorded?
When the revenue is earned
What flows from the statement of RE to the balance sheet?
Ending Retained Earnings
To close the revenue account you must (debit/credit?) the account
What is debit?
Prepaid Expense is a(n)
Asset, Liability, Stockholder's Equity
What is an Asset?
Cash, Accounts Receivable, Inventory
To close the expenses account you must (debit/credit?) the account
What is credit?
Accounting that records the impact of a business event as it occurs, regardless of whether the transaction effected cash
What is accrual accounting?
Dividends have a normal balance of...
Debit
To close the dividends account you must (debit/credit?) the account
What is credit?
Accounting that records only transactions in which cash is received
What is cash-basis accounting?
Increasing Revenue (Increases/Decreases) Stockholder's Equity
Increases
The acronym used to remember which accounts must be closed at the end of the period
What is R.E.D?
A principle that states that all expenses incurred during a period should be identified and measured to match them against revenue during the same period
Expense- Recognition Principle
Frost Enterprises buys a warehouse for $530,000 to use for its East Coast distribution operations. On the date of the purchase, a professional appraisal shows a value of $580,000 for the warehouse. The seller had originally purchased the building for $520,000. Frost has a similar warehouse on the West Coast that has a book value of $544,000. Under the historical cost principle, Frost should record the building for...
$530,000