Accounting Exam 2

Accrued Revenues

Earned in a period t in cash or other assets. hat are both unrecorded and not yet received

closing process

identify accounts for closing, record and post closing entries, and prepare post closing trial balance.

accounting cycle

analyze transactions, journalize, post, prepare unadjusted trial balance, adjust and post accounts, prepare financial statements, close accounts, prepare post closing trial balance, reverse and post.

current ratios

= current assets/current liabilities

fiscal year

12 month period that organizations, businesses, and governments use for accounting, Budgeting, and financial reporting

adjusting entry

end of period accounting journal entries that assign revenues and expenses to the correct time period

Why do we need adjusting entries?

necessary to align your financial records with the accrual basis of accounting

what do adjusting entries accomplish?

they ensure revenues and expenses are recognized in the correct period under accrual accounting

profit margin

measures how much profit a company keeps from its sales revenue as a percentage. = net income/net sales x 100

Temporary/Nominal Accounts

general ledger accounts used to track financial data for a single, specific accounting period

Closing entry

journal entry made at the end of an accounting period to transfer balances from temporary accounts

classified balance sheet

organizes a company’s financial position by grouping assets and liabilities into specific subcategories

accrual basis accounting

revenues and expenses are recorded when they are earned and incurred

contra account

general ledger account used to reduce the value of a related parent account. it carries an opposite (debit or credit) to the main account

accumulated depreciation

total, cumulative amount of a fixed assets cost that has been allocated as a depreciation expense since the asset was put into service

book value

net asset value of a company or an individual asset as recorded on its official financial balance sheets

adjusted trial balance

internal accounting document that lists all general ledger accounts and their final balances after adjusting entries have been posted

financial statements order

income statement, statement of retained earnings, balance sheet, statement of cash flow

worksheet

multi-column spreadsheet used by accountants to organize and verify financial data

income summary account

temporary holding account used at the end of an accounting period to close out all revenue and expense accounts

reversing entries

optional journal entries recorded on first day of a new accounting period to undo previous adjusted entries