Term
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Definition
| the net increase in SHE that results from operation |
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Term
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Definition
| the belief that a company goes on indefinitely |
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Term
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Definition
| accounting periods under a year |
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Term
| accrual accounting (matching rule) |
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Definition
measured by assigning:
-revenues to the accounting period in which the goods are sold or the services are performed
-expenses to the accounting period in which they are used to produce revenue |
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Term
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Definition
| practice of accounting for revenues in the period in which cash is received and for expenses in the period in which cash is paid |
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Term
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Definition
| determining WHEN revenue should be recorded |
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Term
| conditions for revenue recognition |
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Definition
-persuasive evidence of an arrangement exists
-a product or service has been delivered
-the seller's price to the buyer is fixed or determinable
-collectability is reasonably ensured |
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Term
| conditions for recognizing expenses |
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Definition
-there is an agreement to purchase goods or services
-the goods have been delivered or the services rendered
-a price has been established or can be determined
-the goods or services have been used to produce revenue |
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Term
| four types of adjusting entries |
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Definition
1. allocating recorded costs between two or more accounting periods
2. recognizing unrecorded expenses
3. allocating recorded, unearned revenues between two or more accounting periods
4. recognizing unrecorded, earned revenues |
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Term
| examples of 1. allocating recorded costs between two or more accounting periods |
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Definition
| prepaid rent, prepaid insurance, supplies, depreciation. involves an asset account and an expense account |
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Term
| examples of 2. recognizing unrecorded expenses |
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Definition
| wages and interest that have been incurred but are not recorded during an accounting period. involves an expense account and a liability account. |
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Term
| examples of 3. allocating recorded, unearned revenues between two or more accounting periods |
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Definition
| payments received in advance and deposits made for goods or services to be delivered or provided in the future. involves a liability account and a revenue account. |
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Term
| examples of 4. recognizing unrecorded, earned revenues |
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Definition
| revenue that a company has earned for providing a service but for which it has not billed or collected a fee by the end of the accounting period. involves an asset account and a revenue account. |
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Term
| prepaid expenses: how to adjust |
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Definition
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Term
| prepaid rent: how to adjust |
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Definition
DR to rent expense
CR to pp rent |
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Term
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Definition
DR supplies expense
CR supplies |
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Term
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Definition
| when expenses and the corresponding liability accumulate |
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Term
| unrecorded (accrued wages): how to adjust |
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Definition
DR wages expense
CR wages payable |
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Term
| estimated income taxes: how to adjust |
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Definition
DR income taxes expense
CR income taxes payable |
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Term
| unearned revenues (deferred revenues) |
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Definition
| revenues received in advance |
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Term
| unearned revenue: how to adjust |
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Definition
DR to unearned [service] revenue
CR to [service] revenue |
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Term
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Definition
| revenues a company has earned by performing a service or delivering goods but for which no entry has been made in the accounting records |
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Term
| [service] revenue: how to adjust |
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Definition
DR to A/R
CR to [service] revenue |
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Term
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Definition
| the manipulation of revenues and expenses to achieve a specific outcome |
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