ACC Chapter 3

Pizza Company prepaid 3 months store rent. The Journal entry to record this transaction includes a

- debit to prepaid rent - credit to cash

The key factor is determined weather the?

- seller has provided the goods or services to the customer

Performing services on account will increase

- stockholders equity - total assets

On June 1, Pizza Company entry to record this payment will included a 100$

-debit to advertising expense - credit to cash

The entry to record the sale of services for cash includes a

-debit to cash - credit to service revenue

Which of the following are found on an income statement?

-expenses -revenue -net income

The net profit margin ration

-means improved performance if its increase - indicates how well expense are controlled

Accruix Inc. uses accrual basis accounting. Its balance sheets reported Accounts Receivable of 5,000 at the end of its first year of business. Its income statement reported Sales Revenue of 100,000 for its first year. What would Accruixs revenues have been if it had used cash basis accounting?

95,000$ ( 100,000-5,000)

______________________ is not allowed by GAAP because it may distort a company's financial performance

Cash basis of accounting

Net Profit Margin

Net Income/Revenue

Pre-Paid Advertising

Payment occurs in advance of when the advertisement is run

Expense Recognition Principle

Record expenses when incurred in earning revenue

Revenue Recognition Principle

Record revenues when or as work is done not necessarily when cash received

Accrual Basis Accounting

Record revenues when or as work is done, and expenses when incurred

Cash Basis Accounting

Record revenues when or as work is done, and expenses when incurred

Accounts Receivable

The service is performed prior to the collections

Operating activity

are the primary source of revenues and expenses and affect weather a company earns earns a profit or increase a loss

Reporting revenues only when cash is received and expenses only when cash is paid is called the ______________ basis of accounting

cash

After increases and decreases in an account are recorded, the amount remaining in the account is its

ending balance

The primary source revenues and expenses comes from?

operating activities