CB Bookkeeper flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Accrued revenue adjusting entry

Debit Accounts Receivable and credit Revenue to record revenue earned but not yet billed or collected at the end of the accounting period.

Accrued expense adjusting entry

Debit an expense account and credit a liability account to record an expense incurred but not yet paid or recorded at period end.

Unearned revenue adjustment

Debit Unearned Revenue and credit Revenue for the portion of cash received in advance that has been earned during the period.

Prepaid expense adjustment

Debit an expense account and credit the prepaid asset account for the portion of a prepayment used or expired during the period.

Depreciation adjusting entry

Debit Depreciation Expense and credit Accumulated Depreciation to allocate an asset's cost over its useful life; the asset account is not credited.

Adjusting entries and cash

Adjusting entries never debit or credit Cash; they update accrual, deferral, and depreciation accounts before financial statements are prepared.

Transposition error

An error in which digits are reversed, such as recording 54 instead of 45; the resulting difference is divisible by 9.

Error of omission

A transaction is completely left out of the accounting records; because neither debit nor credit is recorded, the trial balance still balances.

One-sided entry

Only one side of a transaction is recorded, such as a debit without a credit; this causes the trial balance to be out of balance.

Suspense account

A temporary account used to hold an unexplained trial balance difference until the error is found and a correcting entry clears the balance.

Prior-period error correction

A material error from an earlier period is corrected by adjusting opening retained earnings and restating comparative financial statements rather than current income.

Gross pay formula

Gross pay equals regular hours multiplied by the regular rate plus overtime hours multiplied by the overtime rate, typically 1.5 times the regular rate.

Net pay formula

Net pay equals gross pay minus all employee deductions, including income tax withholding, FICA taxes, and voluntary deductions such as insurance or retirement contributions.

FICA taxes

FICA consists of Social Security tax of 6.2% up to the annual wage base and Medicare tax of 1.45% on all wages for employees.

FUTA wage base

FUTA tax is 0.6% of the first $7,000 of wages paid to each employee after the state unemployment tax credit is applied.

Employer payroll tax entry

Debit Payroll Tax Expense and credit FICA Payable, FUTA Payable, and SUTA Payable for the employer's matching and unemployment taxes.

Straight-line depreciation

Annual depreciation equals cost minus salvage value, divided by the asset's useful life in years; the same amount is recorded each full year.

Double-declining balance

Depreciation equals beginning book value multiplied by twice the straight-line rate; salvage value is ignored in the calculation but book value is not reduced below salvage.

Units-of-production depreciation

Depreciation equals cost minus salvage value, divided by total estimated units, then multiplied by units produced in the current period.

Book value

Book value equals the asset's cost minus accumulated depreciation; it is an accounting carrying amount, not the asset's market value.

Change in depreciation estimate

A revision of useful life or salvage value is applied prospectively over the remaining life; previously reported depreciation is not restated.

FIFO rising prices

FIFO assigns oldest costs to cost of goods sold, so rising prices produce higher ending inventory, lower cost of goods sold, and higher net income.

LIFO rising prices

LIFO assigns newest costs to cost of goods sold, so rising prices produce lower ending inventory, higher cost of goods sold, lower net income, and lower taxes.

Weighted average cost

The weighted average cost per unit equals the cost of goods available for sale divided by the number of units available for sale.

Cost of goods sold formula

Cost of goods sold equals beginning inventory plus purchases minus ending inventory under a periodic inventory system.

Ending inventory error effect

Overstating ending inventory overstates current-period net income; when the error reverses, it understates the next period's net income.

Fraud triangle

The three conditions associated with fraud are pressure or incentive, opportunity, and rationalization; all three are often present when fraud occurs.

Segregation of duties

Authorization, custody of assets, and recording should be assigned to different people so that no one person can both commit and conceal an error or fraud.

COSO components

The five COSO internal control components are control environment, risk assessment, control activities, information and communication, and monitoring.

Preventive control

A control designed to stop errors or fraud before they occur, such as requiring approvals, passwords, or physical locks on assets.

Detective control

A control designed to find errors or fraud after they occur, such as bank reconciliations, internal audits, and physical inventory counts.

Bank reconciliation control

A bank reconciliation compares the bank statement with the company's cash records and is a detective control performed by someone independent of cash handling.