Accounting 1 Dersi 3. Ünite Sorularla Öğrenelim

What is the main difference between the cash basis accounting and the accrual basis accounting?

Accounting is based on either the cash basis or the accrual basis. The main difference between these two is in the dictation of how the companies’ transactions are recorded. Revenues and expenses may be recorded when the cash related with them is received/paid or when they are earned/incurred.

What does cash basis accounting refer to?

In cash basis accounting, companies record revenues when they receive the cash and they record expenses when the cash is paid.

What does accrual basis accounting refer to?

In accrual basis accounting, companies record revenues when they perform services (rather than when they receive cash) and record expenses when they are incurred (rather than when paid).

What is the time period concept?

The time-period concept (or alternatively periodicity concept) assumes that unlimited economic life of a company will be divided into artificial time periods and that financial statements can be prepared for specific periods such as a month, quarter, or year.

What are the accounting periods for financial reports?

Accounting periods may be monthly, quarterly, semiannually or yearly.

What is fiscal year?

The 12-month accounting period used for the annual financial statements is called as fiscal year.

What are the starting and ending dates for calender year?

Calendar Year = January 1 to December 31.

What is interim period?

If the accounting period is shorter than one year, then it is called as an interim period. Interim periods may be monthly or quarterly.

What is revenue?

Revenue is the gross increase in owner’s equity from delivering goods or services to customers and clients.

What is expense?

Expense is the cost of assets consumed or services used during the revenue earning process.

What does revenue recognition principle refer to?

Revenue recognition principle dictates that revenue is recognized when it is earned not the cash is received.

What does deferred revenue refer to?

In deferred revenue, revenue is recognized after the cash is received.

What does accrued revenue refer to?

In accrued revenue, revenue is recognized before the cash is received.

What does matching Principle mean?

Matching Principle (Expense recognition principle) means that you will record the
expenses at the same time with the revenues related with these expenses are recorded.

What does deferred expense mean?

When an expense is recognized after the cash paid, then it is called as deferred expense (prepaid expense).

What does accrued expense mean?

When an expense is recognized before the cash is paid, then it is called as accrued expense.

What does the adjusting process refer to?

The process of analysing and updating of accounts at the end of the period before the financial statements are prepared is called the adjusting process.

What do we mean by adjusting entries?

The journal entries that bring the accounts up to date at the end of the accounting period are called adjusting entries.

What are the two basic categories of adjusting entries?

There are two basic categories of adjusting entries. These are deferrals and
accruals.

What does depreciable amount refer to?

Depreciable amount is the cost of an asset, or other amount substituted for cost, less than its residual value.

What does depreciation mean?

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

What does useful life refer to?

Useful life is the estimated lifespan of a plant asset.

Which method is used to calculate the depreciation expense?

To calculate the depreciation expense, we will use straight-line depreciation method.

What does accumulated depreciation refer to?

Accumulated Depreciation is a contra asset account and it will accumulate the
depreciation expense during the useful life of depreciable asset.

What does the book value represent?

The book value represents the cost invested in the asset that the business has not yet expensed or unexpired, in other words, reminder usefulness of plant asset.

What is an adjusted trial balance?

The company has journalized and posted all adjusting entries. Next, it prepares another trial balance from the ledger accounts. This is called an adjusted trial balance.