CH 3

income statement

period of time

rev-exp=net income

time period assumption

life of a company divided into shorter

monthly, quarterly, yearly

is a building purchase an expense? (JE)

no, it’s an asset.
PPE $1M +A
Cash $100,000 - A
NP $900,000 +L

supplies purchased to be used next month (JE)

not an expense
supplies 100 +A
cash 100 -A
change in comp. of assets

cash basis accounting

report revenue when cash is received expense when cash is paid.
not GAAP

GAAP Stands for

Generally Accepted Accounting Principles.

GAAP are the ____ in the ___ to calculate and ____ information in f/s.

rules
US
report

A____ B____ accting reports revenue when ___ and expense when ___.
regard less of _____, ____, or ___.

accrual basis acct
earned
incurred
cash, receipt, or payment

R___ R____ Principle is required under accrual acct. records revenue when earned.

Revenue Recognition Principles

deferred revenue is a ____ representing a company’s obligation to provide good or services in the ____.

liability

future

E____ R___ Principle
dr. v knows it as____
records expenses in the same ____ as the revenue they ____.

Expense Recognition
Matching
Period
Generate

symbol for revenue expense

revenue: +R +SE
expense: +E -SE

a trial balance is reported by simply listing and summarizing the ____ balances.

t-accounts balances

prepaid=

an asset

stockholders’ equity includes

1. commons stock (contributed capital)

2. retained earnings

revenue are recorded with a _____.

credit
D|C
A: + -
L: - +
SE: - +
R: - +
E: + -

expenses are recorded with a ____.

debit
D|C
A: + -
L: - +
SE: - +
R: - +
E: + -

revenue: amount earned by selling goods or services to ______.

customers.

expenses: cost of business to earn ___,

revenues.

revenue recognition principle
revenue recognized when ____.
earned means company has ____ its obligation to customer

earned
fulfilled

think og revenue & expenses as subcategories within ___ ___.

retained earnings

promises exchange for promises are not considered ____, this no ___ ___.

transaction
journal entry

AR stands for ___,
AR is an _____.
AR is the amounts _____ to the business bt customers for ____.

accounts receivable
asset
amounts owed to the business by customer for past transaction.

AP stands for ___
It is a ___.
Amount owed by the business.
to ____ for ____ ____.

Accounts Payable
Liability
Suppliers, past transaction

payable is a

liability

permanent accounts

balance sheets
accounts specifically
A,L,SE

temporary accounts

Revenue
Expense
Dividend

Net Income

1. not ___

2. not __

3. not ____

1. cash

2. change in val.

3. exact

IFRS stands for __ __ __ __.
It is the rules _ to - & - info in f/s.

International Financial Reporting Standards.

rules used internationally to calculate & reports info on f/s.