Exam (elaborations)
Accounting Basics questions answered in right manner.
- Course
- Institution
Accounting Basics questions answered in right manner.
[Show more]
Seller
Follow
Content preview
Accounting Basics questions answeredin right manner.
Income Statement ANS - A financial document that shows how much money (revenues) came in and
how much money (expenses) was paid out. An income statement, does not report the cash coming in—
rather, its purpose is to (1) report the revenues earned by the company's efforts during the period, and
(2) report the expenses incurred by the company during the same period. The purpose of the income
statement is to show a company's profitability during a specific period of time. The difference (or "net")
between the revenues and expenses for the company is often referred to as the bottom line and it is
labeled as either Net Income of Net Loss. Also known as the Profit & Loss Statement.
Accrual basis of accounting ANS - Method of accounting in which income is recorded when earned and
expenses are recorded when incurred. Preferred method of accounting.
Revenue Recognition Principle ANS - The principle prescribing that revenue is recognized when earned.
Cash method basis of accounting ANS - Revenues are recorded in the period in which cash is received
and expenses are recorded in the period in which cash is paid. Less preferred than Accrual basis of
accounting.
Revenue ANS - All income that a business receives over a period of time
Service Revenue ANS - Ordinary revenue for a service business. Revenues accounts are credited when
the company earns a fee (or sells merchandise) regardless of whether cash is received at the time.
Accounts receivable ANS - The total amount of money owed to a business (before cash is actually
received).
Sales ANS - A temporary owner's equity account used to record the earning of revenue
Expenses ANS - An expense is an outflow of money to another person or group to pay for an item or
service, or for a category of costs. Expenses are costs that have expired (have been used up).
, Matching principle ANS - A concept of accounting in which expenses are matched with the revenue
generated during a period by those expenses.
Net Profit ANS - The difference between total revenue and total expenses when total revenue is
greater.
Net Loss ANS - The difference between total revenue and total expenses when total expenses are
greater
Balance Sheet ANS - A financial statement that reports assets, liabilities, and owner's (stockholder's)
equity on a specific date.
Assets ANS - What a company owns; anything of value owned by a business. Includes costs that are not
yet expired (used up). Vehicles, Cash, Equipment, Supplies, Accounts Receivable, Prepaid Expenses
(Insurance), Land, Office Equipment
Cost Principle ANS - The principle that states that, when purchased, all assets are recorded at their
actual cost regardless of market value.
Conservatism ANS - The accounting concept by which the least favorable figures are presented in the
financial statements - not overstating the value of an asset, or understating the value of a liability or
debt. So an accountant wouldn't increase the value of an asset because of market value, but they may
decrease it.
Depreciation Expense ANS - The portion of a plant asset's cost that is transferred to an expense account
in each fiscal period during a plant asset's useful life
Useful Life ANS - The period of time an asset can be productively used.
Carrying Amount ANS - The original cost of an asset less the accumulated depreciation
Liabilities ANS - What a company owes. Notes (loans) Payable, Wages Payable, Interest Payable,
Accounts Payable, Unearned Revenue
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Professorkaylee. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
77254 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now