Accounting T2 Flashcards

Adjusting entries are required every time a company prepares financial statements to ensure accounts are up to date for financial statement purposes.

The matching principle dictates that efforts (expenses) be matched with results (revenues).

It is an accounting basis in which companies record revenue when they receive cash and an expense when they pay cash.

<p>It is an accounting basis in which companies record transactions that change a company's financial statements in the periods in which the event occurs.</p> Signup and view all the answers

<p>A contra account is an account offset against an asset account on the balance sheet.</p> Signup and view all the answers

<p>Profit margin is a ratio that measures net income relative to net sales, showing what percentage of sales are left after all expenses are paid.</p> Signup and view all the answers

<p>Net income or net loss equals total revenues minus total expenses. If revenue is greater than expenses, there is net income; if revenue is less, there is a net loss.</p> Signup and view all the answers

<p>It shows how assets are depreciated and how the asset and its accumulated depreciation appear on the balance sheet.</p> Signup and view all the answers

<p>Accrued Expenses: Expenses incurred but not yet paid in cash (Liability); Accrued Revenues: Revenues for services performed but not yet received in cash (Asset).</p> Signup and view all the answers

<p>Prepaid expenses: Expenses paid in cash before they are used (Asset); Unearned revenues: Cash received before services are performed (Liability).</p> Signup and view all the answers

<p>It lists permanent accounts and their balances after journalizing and posting closing entries.</p> Signup and view all the answers

<p>Accrued revenues is income that has been earned but the revenue has not been received.</p> Signup and view all the answers

<p>Temporary accounts such as revenues and expenses are closed, while permanent accounts remain.</p> Signup and view all the answers

<p>Current assets, long-term investments, fixed assets, intangible assets, current liabilities, long-term liabilities, and shareholders' equity.</p> Signup and view all the answers

<p>An asset account with a credit balance, reported on the balance sheet under Property, Plant, and Equipment.</p> Signup and view all the answers

<p>It includes collecting and analyzing transaction data, journalizing transactions, posting to the general ledger, preparing trial balances, adjusting entries, and preparing financial statements.</p> Signup and view all the answers

<p>Profit margin = Net Income / Net Sales (revenue).</p> Signup and view all the answers

<p>It is the amount that can be depreciated on an asset, calculated by subtracting the salvage value from its cost.</p> Signup and view all the answers

<p>The difference between the cost of any depreciable asset and its accumulated depreciation.</p> Signup and view all the answers

<p>A list of accounts and their trial balances after all adjustments have been made.</p> Signup and view all the answers

<p>Expenses that are incurred but not yet paid or recorded by the statement date.</p> Signup and view all the answers

<p>Current ratio = current assets / current liabilities.</p> Signup and view all the answers

<p>Close revenue and expense accounts to Income Summary, then close Income Summary and dividends to Retained Earnings.</p> Signup and view all the answers

<p>All revenue accounts, all expense accounts, and dividends.</p> Signup and view all the answers

<p>Nominal accounts include temporary accounts that report revenue, expenses, gains, and losses.</p> Signup and view all the answers

<p>Permanent accounts do not close at the end of the accounting year; they carry over to the next period.</p> Signup and view all the answers

<p>All asset accounts, all liability accounts, and stockholders' equity.</p> Signup and view all the answers

<p>Assets, liabilities, and stockholder equity accounts reported on the balance sheet.</p> Signup and view all the answers

<p>Temporary accounts (service revenue, salaries expense, etc.) and real accounts (cash, accounts receivable, etc.).</p> Signup and view all the answers

<p>They transfer temporary account balances to the Retained Earnings account and produce zero balances in temporary accounts.</p> Signup and view all the answers

<p>Land is not depreciated because it has an unlimited useful life.</p> Signup and view all the answers

<p>The order is the income statement, statement of retained earnings, balance sheet, and statement of cash flows.</p> Signup and view all the answers

<p>The allocation of the cost of an asset to expense over its useful life in a rational and systematic manner.</p> Signup and view all the answers

<p>It is the principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.</p> Signup and view all the answers

<p>It dictates that companies record assets at their cost, regardless of any increase in value.</p> Signup and view all the answers

<p>It reports revenues, expenses, and the resulting net income.</p> Signup and view all the answers

<p>It shows the retained earnings at the beginning and end of the accounting period, including net income and dividends.</p> Signup and view all the answers

<p>It reports assets, liabilities, and shareholder equity of the company.</p> Signup and view all the answers