Revenue & Expense Recognition
Revenues should be recognized when this is delivered
What is the good or service?
These two types of accounts increase with debits
What are assets and expenses?
Financial statement that reports movement of cash into and out of the corporation during the accounting period
What is the Statement of Cash Flows?
True/False:
Retained earnings is a permanent account, meaning its end balance from one year becomes its beginning balance the following year
What is true?
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?
Rather than indicating increase or decrease on their own, debit simply means ___ & credit simply means ____
What is debit=left and credit=right?
Also called the P&L, this financial statement reports on revenues generated & the costs to generate them in a given accounting period
What is the income statement?
This journal entry is used when a ABC corporation prepays its insurance company $3600 on November 1st for the next 18 months of coverage
What is
Nov 1 Dr. Prepaid Insurance 3600
Cr. Cash 3600
?
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?
To decrease a liability account, one should ___ (dr or cr it)
What is debit?
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?
ABC corporation prepaid its insurance company $3600 on November 1st for the next 18 months of coverage. This is the adjusting journal entry ABC corporation then makes on December 31st
What is
Dec 31 Dr. Insurance Expense 200
Cr. Prepaid Insurance 200
?
Liabilities increase with this (debit or credit)
What is a credit?
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
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]
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 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?
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
What is
Dr. Prepaid Rent (+A)
Cr. Cash (-A)
&
Dr. Rent Expense (+E, -NI, -RE, -SE)
Cr. Prepaid Rent (-A)
Financial statement that reports on the resources of the company & the sources of financing for those resources
What is the Balance Sheet?
This account is never involved in adjusting journal entries
What is cash?
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?