ACCT 2110 EXAM 2 VERIFIED ACCURATE STUDY
GUIDE
Cash Basis Accounting - Answers -Revenue is recorded when cash is received,
regardless of when it is actually earned. An expense is earned when it is paid.
Accrual Accounting - Answers -Requires that any incomplete activities be recognized in
the financial statement
Accrual Basis Accounting - Answers -Transactions are recorded when they occur, links
income measurement to selling. More complex records both cash and non-cash
transactions
Accrual Basis Accounting - Answers -Revenue is recognized when it is earned and
expenses are recognized when they are incurred.
Time Period Assumption - Answers -Allows companies to artificially divide their
operations into time periods so they can satisfy users demands for information
Revenue Recognition Principle - Answers -Determines when revenue is recorded and
reported. Revenue is recognized/recorded when the revenue has been earned, and the
collection of cash is reasonably assured, regardless of when cash is recieved
Expenses - Answers -Incurred when an asset is used, or when a liability is created, is
recorded when it is incurred, regardless of when cash is paid
Expense Recognition Principle - Answers -Expenses are recorded and reported in the
same time period as the revenue that helped generate it. The key is to match expense
with its revenue
Securities and Exchange Commission - Answers -Conducted numerous investigations
involving the abuse of both revenue and expense recognition
Accrual Accounting - Answers -Revenue is recognized when it is earned and expenses
are matched with revenues
Adjusting Entries - Answers -Journal entries made at the end of an accounting period to
record the completed portion of partially completed transactions
Accruals and Deferrals - Answers -Timing differences give rise to two categories of
adjusting entries
, Accrued Revenues - Answers -Previously unrecorded revenues that have been earned
but for which no cash has yet been received
Accrued Expenses - Answers -Previously unrecorded expenses that have been
incurred but not yet paid in cash
Deferred (unearned) Revenues - Answers -Liabilities arising from the receipt of cash for
which revenue has not yet been earned
Deferred (prepaid) Expenses - Answers -Assets arising from the payment of cash
which have not been used or consumed by the end of the period
Cash - Answers -Is never affected by adjustments
Adjusting Entries - Answers -Will affect at least one income statement account and one
balance sheet account
Identify - Answers -Step 1: ____________ Pairs of income statement and balnace
sheet accounts that require adjustment
Calculate - Answers -Step 2: ____________ The amount of the adjustment based on
the amount of revenue that was earned or the amount of expense that was incurred
durring the accounting period
Record - Answers -Step 3: __________ The adjusting journal entry
Depreciation - Answers -The assets cost as an expense to each period it was used
Contra Accounts - Answers -Accounts that have a balance that is opposite of the
balance in a related account
Interest - Answers -= Principle * Interest Rate * Time
Adjusted Trial Balance - Answers -After a company has journalized and posted all of
the adjusting entries, it updates the trial balance to reflect the adjustments that have
been made.
Net Income - Answers -Prepared from the revenue and expense accounts
Net Income & Dividends - Answers -Used to prepare the retained earnings statement
Balance Sheet - Answers -Is prepared using the ending balance of retained earnings
from the retained earnings statement
Assets, Liabilities, and Stockholders Equity - Answers -Permanent accounts are carried
forward from the current accounting period to future accounting periods
GUIDE
Cash Basis Accounting - Answers -Revenue is recorded when cash is received,
regardless of when it is actually earned. An expense is earned when it is paid.
Accrual Accounting - Answers -Requires that any incomplete activities be recognized in
the financial statement
Accrual Basis Accounting - Answers -Transactions are recorded when they occur, links
income measurement to selling. More complex records both cash and non-cash
transactions
Accrual Basis Accounting - Answers -Revenue is recognized when it is earned and
expenses are recognized when they are incurred.
Time Period Assumption - Answers -Allows companies to artificially divide their
operations into time periods so they can satisfy users demands for information
Revenue Recognition Principle - Answers -Determines when revenue is recorded and
reported. Revenue is recognized/recorded when the revenue has been earned, and the
collection of cash is reasonably assured, regardless of when cash is recieved
Expenses - Answers -Incurred when an asset is used, or when a liability is created, is
recorded when it is incurred, regardless of when cash is paid
Expense Recognition Principle - Answers -Expenses are recorded and reported in the
same time period as the revenue that helped generate it. The key is to match expense
with its revenue
Securities and Exchange Commission - Answers -Conducted numerous investigations
involving the abuse of both revenue and expense recognition
Accrual Accounting - Answers -Revenue is recognized when it is earned and expenses
are matched with revenues
Adjusting Entries - Answers -Journal entries made at the end of an accounting period to
record the completed portion of partially completed transactions
Accruals and Deferrals - Answers -Timing differences give rise to two categories of
adjusting entries
, Accrued Revenues - Answers -Previously unrecorded revenues that have been earned
but for which no cash has yet been received
Accrued Expenses - Answers -Previously unrecorded expenses that have been
incurred but not yet paid in cash
Deferred (unearned) Revenues - Answers -Liabilities arising from the receipt of cash for
which revenue has not yet been earned
Deferred (prepaid) Expenses - Answers -Assets arising from the payment of cash
which have not been used or consumed by the end of the period
Cash - Answers -Is never affected by adjustments
Adjusting Entries - Answers -Will affect at least one income statement account and one
balance sheet account
Identify - Answers -Step 1: ____________ Pairs of income statement and balnace
sheet accounts that require adjustment
Calculate - Answers -Step 2: ____________ The amount of the adjustment based on
the amount of revenue that was earned or the amount of expense that was incurred
durring the accounting period
Record - Answers -Step 3: __________ The adjusting journal entry
Depreciation - Answers -The assets cost as an expense to each period it was used
Contra Accounts - Answers -Accounts that have a balance that is opposite of the
balance in a related account
Interest - Answers -= Principle * Interest Rate * Time
Adjusted Trial Balance - Answers -After a company has journalized and posted all of
the adjusting entries, it updates the trial balance to reflect the adjustments that have
been made.
Net Income - Answers -Prepared from the revenue and expense accounts
Net Income & Dividends - Answers -Used to prepare the retained earnings statement
Balance Sheet - Answers -Is prepared using the ending balance of retained earnings
from the retained earnings statement
Assets, Liabilities, and Stockholders Equity - Answers -Permanent accounts are carried
forward from the current accounting period to future accounting periods
