Accounting Principles Chapter 10 Flashcards

Questions and Answers

What is the definition of Prudence in accounting?

Publicly traded companies record when revenue is earned.

The methods least likely to overstate assets and income are used. (correct)

Business statements are impartial and absent of bias.

The same accounting methods are used year to year.

What defines Consistency in accounting?

Business statements are impartial and absent of bias.

The methods least likely to overstate assets and income are used.

Publicly traded companies record when revenue is earned.

The same accounting methods are used year to year. (correct)

What is Revenue Recognition?

How can you keep track of services performed before adding charges to an invoice?

The same accounting methods are used year to year.

Business statements are impartial and absent of bias.

Publicly traded companies record when revenue is earned. (correct)

What does Objectivity mean in accounting?

Business statements are impartial and absent of bias. Signup and view all the answers

How can you keep track of services performed before adding charges to an invoice?

Create delayed charges for the services as completed. Signup and view all the answers

What agency sets the GAAP principles?

Financial Accounting and Services Board Signup and view all the answers

How does QuickBooks assist with the third step of the accounting cycle?

It posts transactions to the general ledger. Signup and view all the answers

What type of entry is a delayed charge?

Non-posting Signup and view all the answers

What report tracks how much you've made or lost in a specific aspect of your business?

Profit & Loss by Class Signup and view all the answers

What are the Generally Accepted Accounting Principles?

Regulations set by the Financial Accounting and Standards Board (FASB) to regulate accounting practices. Signup and view all the answers

What feature does Juan use to track the profitability of three aspects of his restaurant?

Class tracking Signup and view all the answers

What is a limitation associated with location tracking?

Only one location per transaction form can be tracked. Signup and view all the answers

Why use class tracking?

To produce reports that focus on the aspects of the business you're tracking. Signup and view all the answers

What action do you take in QuickBooks after using your company Visa card to buy lunch?

Record an expense transaction. Signup and view all the answers

What is an example of a class in accounting?

Remodeling Signup and view all the answers

What is the accounting cycle?

A series of steps that help a business properly keep its accounting records during the fiscal period. Signup and view all the answers

When you use location tracking, what report helps you track sales growth at each of your store locations?

Sales by Store Summary Signup and view all the answers

Study Notes

Key Accounting Principles

Prudence: Emphasizes conservative methods to prevent overstating assets and income in financial statements.
Consistency: Requires the application of the same accounting methods continuously over time to ensure comparability.
Revenue Recognition: Mandates that publicly traded companies acknowledge revenue in financial records when it is earned, rather than when cash is received.
Objectivity: Stresses the importance of impartiality in financial statements, ensuring they are free from bias.

Accounting Practices

Delayed Charges: Services performed before invoicing can be tracked using delayed charges, allowing for accurate record-keeping.
Financial Accounting and Services Board: Sets the Generally Accepted Accounting Principles (GAAP), guiding standard accounting practices.
QuickBooks Role: Assists in posting transactions to the general ledger, facilitating step three of the accounting cycle.

Types of Accounting Entries

Non-Posting Entries: Delayed charges are categorized as non-posting entries, indicating they do not immediately impact the general ledger.
Profit & Loss by Class Report: This report allows businesses to monitor earnings and losses specific to different operational areas.

Accounting Features

GAAP: Refers to regulations established by the Financial Accounting and Standards Board (FASB) to standardize accounting practices across various industries.
Class Tracking: Useful for tracking specific profitability aspects within a business, such as separate sales channels like dining, bar, and merchandise.
Location Tracking Limitation: Only one location can be recorded per transaction form, which may limit detailed tracking across multiple sites.

Reporting and Record Keeping

Purpose of Class Tracking: Helps produce targeted reports focusing on particular aspects of the business for better financial insights.
Expense Transaction Recording: Requires entering an expense in QuickBooks when a company card is used, ensuring accurate tracking of expenses.
Remodeling as a Class: Provides an example of categorizing specific areas of business operations for profit tracking.

Accounting Cycle Overview

Accounting Cycle Definition: A systematic process consisting of several steps enabling businesses to maintain accurate accounting records throughout the fiscal period.
Sales by Store Summary Report: Aids in tracking sales growth across different store locations when using location tracking features in accounting software.

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Description

Test your knowledge with flashcards covering key accounting terms from Chapter 10. This quiz includes definitions of important concepts such as prudence, consistency, revenue recognition, and objectivity. Perfect for students seeking to reinforce their understanding of accounting principles.