Cash Basis
Accrual Basis
2 principles
Profit Rich&
Cash Poor
Extra
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The practice of summarizing operating results in
terms of cash receipts and cash payments,
rather than revenue earned or expenses
incurred.
What is “Cash Basis Accounting”?
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Short-term, highly liquid investments, such as
money market funds, commercial paper, and
Treasury bills that will mature within 90 days
from the acquisition date.
What is “Cash equivalents”?
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Concept under which cash receipts must be
recorded as soon as all restrictions related to the
receipt have ended.
What is “Constructive Receipt”?
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Measures taken by management to make the
company appear as strong as possible in its
financial statements.
What is “Window Dressing”?
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This type of corporation refers to any
corporation that, under United States federal
income tax law, is taxed separately from its
owners. This type of corporation is distinguished
from an S corporation, which generally is not
taxed separately.
What is “C Corporation”?
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Assets representing advance payment of the
expenses of future accounting periods. As time
passes, adjusting entries are made to transfer
the related costs from the asset account to an
expense account.
What is “Prepaid Expenses” (or Deferred
Expenses)
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An obligation to deliver goods or render services
in the future, stemming from the receipt of
advance payment.
What is “Unearned revenue” (or Deferred
Revenue)?
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Money owed to a business by its clients
(customers or debtors) and shown on its balance
sheet as an asset.
What is “Account Receivable”?
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This account is never touched during adjusting
entries.
What is “Cash account”?
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The only Accounting Method accepted by GAAP.
“What is Acrual Based Accounting?
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The generally accepted accounting principle that
determines when expenses should be recorded
in the accounting records. The revenue earned
during an accounting period is matched (offset)
with the expenses incurred in generating that
revenue.
What is “matching principle”?
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The general accepted accounting principle that
determines when revenue should be recorded in
the accounting records. Revenue is realized
when services are rendered to customers or
when goods sold are delivered to customers.
What is “realization principle”?
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Accounting principle which plays a major role in
making of adjusting entries.
What is “materiality”?
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Entries made at the end of the accounting
period for the purpose of recognizing revenue
and expenses that are not properly measured as
a result of journalizing transactions as they
occur.
What is “adjusting entries”?
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The accounting treatment accorded to this items
is of little or no consequence to decision makers.
What is “immaterial items”?
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A financial statement summarizing the results of
operations of a business by matching its revenue
and related expenses for a particular accounting
period. Shows the net income or net loss.
What is “income statement”?
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An increase in owners’ equity resulting from
profitable operations. Also, the excess of
revenue earned over the related expenses for a
given period.
What is “net income”?
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Assets that have been pledged to secure specific
liabilities. Creditors with secured claims can
foreclose on (seize the title to) these assets if
the borrower defaults.
What is “collateral”?
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A book written by Dr.Howard Schilit which talks
about seven primary ways in which corporate
management manipulates the financial
statements of a company.
What is “Financial Shenanigans?”
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Income coming from interest payments,
dividends, capital gains collected upon the sale
of a security or other assets, and any other
profit that is made through an investment
vehicle of any kind.
What is “investment income”?
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The interest that a debtor pays before the first
scheduled debt repayment.
What is “Prepaid Interest’?
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A type of account in the current liabilities
section of a company's balance sheet. This
account is comprised of taxes that must be paid
to the government within one year.
What is “Income Tax Payable”?
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Income that a company receives from its normal
business activities, usually from the sale of
goods and services to customers.
What is “revenue”?
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Outflow of money to another person or group to
pay for an item or service, or for a category of
costs
What is “expense”?
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Jeopardy + Bingo = ?
What is “Jeopardingo”?
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