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
