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    Accounting I Chapter 6 Key Terms

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    Worksheet and Adjusting Entries for a Service Business

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    fiscal period The length of time for which a business summarizes its financial information and reports its financial performance

    fiscal year A fiscal period consisting of 12 consecutive months

    work sheet A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.

    trial balance The total of all debit account balances must equal the total of all credit account balances and this accounting form is used to prove the equality of debits and credits in a general ledger.

    prepaid expense Cash paid for an expense in one fiscal period that is not used until a later period

    accrual basis of accounting Reporting income when it is earned and expenses when they are incurred

    cash basis of accounting Reporting income when the cash is received and expenses when the cash is paid

    adjustments Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period

    balance sheet A financial statement that reports assets, liabilities, and owner's equity on a specific date

    income statement A financial statement showing the revenue and expenses for a fiscal period

    net loss The difference between total revenue and total expenses when total expenses are greater

    net income The difference between total revenue and total expenses when total revenue is greater

    adjusting entries Journal entries recorded to update general ledger accounts at the end of a fiscal period

    Consistent Reporting An accounting concept applied when the same accounting procedures are followed in the same way in each accounting period

    Matching Expenses with Revenue An accounting concept applied when amounts that helped earn revenue for a period must be reported as expenses in the same period

    Materiality An accounting concept applied when business activities creating dollar amounts large enough to affect business decisions should be recorded and reported as separate items in the accouning records and financial statements.

    Unit of Measurement An accounting concept requiring that business transactions be reported in numbers that have common values--that is, using a common unit, for example, U.S. dollars

    Accounting Period Cycle An accounting concept applied when changes in financial information are reported for a specific period of time in the form of financial statements

    Exchange Rate The value of one currency for the purpose of conversion to another

    AICPA American Institute of Certified Public Accountants

    NASDAQ created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and commenced operations on February 8, 1971

    Mrs. Huffman Business Teacher PRESTON HIGH SCHOOL Kingwood, WV View profile

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    Accounting Ch 6 Flashcards

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    Accrual basis of accounting

    Click card to see definition ๐Ÿ‘†

    Reporting income when it is earned and expenses when they are incurred

    Click again to see term ๐Ÿ‘†

    Adjusting Entries

    Click card to see definition ๐Ÿ‘†

    Journal entries recorded to update general ledger accounts at the end of fiscal period

    Click again to see term ๐Ÿ‘†

    1/33 Created by 438211

    Terms in this set (33)

    Accrual basis of accounting

    Reporting income when it is earned and expenses when they are incurred

    Adjusting Entries

    Journal entries recorded to update general ledger accounts at the end of fiscal period

    Adjustments

    Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period

    Balance Sheet

    A financial statement that reports assets, liabilities, and owner's equity on a specfic date

    Cash basis of accounting

    Reporting income when the cash is received and expenses when the cash is paid

    Fiscal Period

    The length of time for which a business summarizes its financial information and reports its financial performance

    Fiscal Year

    A fiscal period consisting of 12 consecutive months

    Income Statement

    A financial statement showing the revenue and expenses for a fiscal period

    Net Income

    The difference between total revenue and total expenses when total revenue is greater

    Net Loss

    The difference between total revenue and total expenses when total expenses are greater

    Prepaid Expense

    Cash paid for an expense in one fiscal period that is not used until a later period

    Trial Balance

    A proof of equality of debits and credits in a general ledger

    Work Sheet

    A columnar accounting form used to summarize the general ledger information needed to prepare financial statements

    1. The accounting concept Consistent Reporting is being applied when a delivery business reports revenue for the number of deliveries made one year and the amount of revenue received for the deliveries made the next year

    False

    2. A fiscal period must be 12 months in length

    False

    3.Journals, ledgers, and work sheets are considered permanent records

    False

    4. The heading on a work sheet contains the name of the business, the name of the report, and the date of the report

    True

    5. Only accounts with a balance are listed on a trial balance

    False

    6. The 4 questions asked when analyzing an adjustment are: Why? Where? When? and How?

    False

    7. The two accounts affected by the adjustments for supplies are Supplies and Supplies Expense

    True

    8. The two accounts affects by the adjustment for insurance are Prepaid Insurance Expense and Insurance

    False

    9. The balance in Prepaid Insurance after adjusting entries are recorded represents the amount of insurance premium still remaining

    True

    10. Totaling and ruling the Adjustments columns of a work sheet are necessary to prove the equality of debits and credits

    True

    11. The income statement and balance sheet are prepared from the Trial Balance columns on the work sheet

    False

    12. Net income on a work sheet is calculated by subtracting the Income Statement Debit column total from the Income Statement Credit column total

    True

    13. If errors are found on a work sheet, they must be erased and corrected before any further work is completed

    True

    14. When two column totals are not in balance on the work sheet, the difference between the two totals is calculated and checked

    True

    15. If the difference between the totals of Debit and Credit columns on a work sheet can be evenly divided by 9, then the error is most likely a transposed number

    True

    16. If there are errors in the work sheet's Trial Balance columns, it might be because a general ledger account balance was recorded in the wrong Trial Balance column

    True

    17. Most errors occur in doing arithmetic

    True

    18. The best way to prevent errors is to use a calculator

    False

    19. Adjusting entries must be posted to the general ledger accounts

    True

    20. The balance in Supplies Expense after adjusting entries are recorded represents the amount of supplies used during the fiscal period

    True

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    Reporting income when it is earned and expenses when they are...

    Reporting income when it is earned and expenses when they are incurred. :cash basis of accounting, accrual basis of accounting, income basis of accounting, balance basis of accounting

    Reporting income when it is earned and expenses when they are incurred. ACCOUNTING

    cash basis of accounting

    accrual basis of accounting

    income basis of accounting

    balance basis of accounting

    Answer: accrual basis of accounting

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    Similar Questions

    Reporting income when cash is received and expenses when cash is paid.

    When the Income Statement Debit column total is greater than the Income Statement Credit column total on a work sheet, the business has a net income.

    Net income on a work sheet is calculated by subtracting the Income Statement Debit column total from the Income Statement Credit column total.

    Revenues minus expenses equals _____________________.(Revenues-Expenses = _______________)

    The difference between total revenue and total expenses when total expenses are greater.

    Concept: Business transactions are reported in numbers that have common values. Meaning all reporting should be done in terms of money

    The accounting concept Consistent Reporting is being applied when a word processing service business reports revenue per page one year and revenue per hour the next year.

    The Matching Concept states that revenue should only be recognised when it is earned and not received. If a company sells goods on credit in March and receives payment in May, this would be shown in the sales figure for?

    Expenses are those items that are:

    What is the missing term in the break even formula below? Break even revenue = Operating expenses / ?

    What is the missing term in the break even formula below? Break even units = Operating expenses / (Selling price โ€“ ?)

    Payment of Telephone expenses

    The following are expenses

    The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the:

    Entries to expenses such as Rent Expense are usually

    Under the accrual basis of accounting, expenses are reported in the accounting period when the

    Revenues minus expenses equals:

    The ________________ __________________ is one of the main financial statements and reports revenues and expenses for a period of time such as a month or year.

    The difference between total revenue and total expenses when total revenue is greater.

    A financial statement showing the revenue and expenses for a fiscal period.

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