Accounting Test 1

revenues

_____________ are recorded when the business fulfills its promise to provide goods or services, regardless of when cash is exchanged

adjusted trial balance

a list of all accounts and all of their adjusted balances, which is used to check on the equality of recorded debits and credits

classified balance sheet

a type of balance sheet that shows a subtotal for CURRENT assets and CURRENT liabilities

temporary accounts

accounts that track financial results for a limited period of time by having their balances zeroed out at the end of each accounting year

permanent accounts

accounts that track financial results from year to year by carrying their ending balances into the next year

post closing trial balance

an internal report prepared as the last step in the accounting cycle to check that debits equal credits and all temporary accounts have been closed

current liabilities

debts and obligations that will be paid, settled, or fulfilled within 12 months of the balance sheet date

net profit margin

indicates how much profit is earned from each dollar of revenue, ..meaning: the percentage of revenue that is still in the net income after expenses are subtracted

expense recognition principle (matching principle)

principle, the practice under accrual basis accounting to record expenses in the same period as the revenues they generate, not necessarily the period in which cash is paid for them

revenue recognition principle

principle, the requirement under accrual basis accounting to record revenues when they are earned, not necessarily when cash is received for them

revenues

amounts that are earned by selling goods and services to customers

contra account

an account that is a reduction of another account, it is created to keep track of the deprecation recorded against an account

trial balance

an internal balance report that lists all accounts and their balances to check on the equality of total recorded debits and total recorded credits

current assets

assets that are to be used up or converted into cash within 12 months of the balance sheet date

adjustments

entires made at the end of every accounting period to report revenues and expenses in the proper period, and assets and liabilities at proper amounts

adjusted journal entries

entries that record the effects of each period's adjustments in a debits-equal-credits format

expenses

the costs of business necessary to earn revenues

net income

the excess of revenues - expenses

time period assumption

the long life of a company is divided into shorter periods, such as months, quarters, and years

depreciation

the process of distributing the cost of buildings, vehicles, and equipment to the accounting periods in which they are used

cash basis accounting

type of accounting, reports revenues when cash is received and expenses when cash is paid, not allowed under GAAP

accrual basis accounting

type of accounting, reports revenues when they are earned and expenses when they are incurred, regardless of the timing of cash receipts of payments, required under GAAP

carrying value

value at which an asset is liability is reported in the financial statements

income statement

which statement provides the main measure of of company's operating performance?

noncurrent (or long term)

word for assets and liabilities that do not meet the definition of current