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Financial Accounting Exam 1 terms and rules Questions And Answers
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Financial Accounting Exam 1 terms and rules Questions And Answers Owner's Equity Residual ownership of a company's assets (that is, after factoring out the company's liabilities.) Income Statement A report which measures a company's performance over a specified period of time. Purpose is to...

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  • November 12, 2024
  • 6
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • Financial Accounting
  • Financial Accounting

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Financial Accounting Exam 1 terms and
rules Questions And Answers

Owner's Equity Residual ownership of a company's assets (that is, after factoring out the

company's liabilities.)




Income Statement A report which measures a company's performance over a specified

period of time. Purpose is to "measure the performance of a company over a given period of

time."




Periodic versus Perpetual Approaches A perpetual approach involves updating an account

immediately every time it's balance changes (such as cash) whereas a periodic approach involves

letting accounts "slide" as it were during the periodic and adjusting them to their correct balances

only as of the end of the accounting period. Importantly, note that the only justification for using

a period approach is to save money.




Unadjusted Trial Balance A list of company's active accounts as of the end of the

accounting period based upon all transactions that were recorded and posted during the

accounting period (not intended as a complete list of accounts.)

, Financial Accounting Exam 1 terms and
rules Questions And Answers
Adjusting Entries Year-end journal entries made to correct accounts on the unadjusted

trial balance that are not yet where they should be as of the end of the accounting period (because

of the use of a periodic approach to account for the accounts.)




Unearned Revenue A liability resulting from a company having been paid in advance of

the performance of services.




Materiality Implies the significance or importance. The more material an item, the more

likely that precise accounting is required with more detail provided when the item is presented

on the financial statement.




Accrual Accounting The method chosen in financial accounting by which a company's

performance is measured by first recognizing revenue for the value of goods sold or services

performed followed by matching against the revenues of all the costs incurred in producing the

revenues.




Revenue The value of goods sold or services performed during a given time period.




Expense The cost of all goods sold or services performed during a given time period.

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