What is the main use of accural accounting?
It breaks up the business cycle, for people who need more information.
What is the basic principal behind accural accounting
Transactions are recorded in the period that they happen, rather then when they are received or payed.
What is cash basis accounting?
Revenue is only recorded when cash is recieved.
What is a revenue?
Increase in assets, resulting from a company’s ordinary activities.
What is an expense?
When a decrease in economic resources occurs. Assets are consumed, liabilities are incurred.
What is the need for adjusting entries?
To produce up to date and relevant financial information.
When do you do an adjusted trial balance?
When all adjusting entries have been recorded and posted.
What are closing enteries?
Used at the end of year to close any open accounts.
What type of account are closed?
All temporary accounts.
List the temporary accounts.
Revenue, expense, dividends declared.
What are the 4 steps to the closing process?
Close all revenue accounts, close all expense accounts, close income summary, close dividends declared account.
How do you close revenue accounts?
Debit each account for it’s balance, then credit Income Summary.
How do you close expense accounts?
Debit income summary for total expense, credit each expenses account for balance.
How do you close Income Summary account?
Debit (or credit) income summary for balance in account, credit (debit) retained earnings.
How do you close dividends declared account?
Debit retained earnings and credit dividends declared account for balance.
What are the two things to remember when closing accounts?
Every account has to equal zero, all accounts lead to retained earnings.
What is the post closing trial balance?
Balance sheet done after closing accounts.
