Accounting flashcards, generated for you.

Assets = Liabilities + Equity. Assets are resources owned; Liabilities are obligations owed; Equity is the owner's residual interest.

Debit: left side of ledger account (increases assets/expenses, decreases liabilities/equity). Credit: right side (increases liabilities/equity/revenue, decreases assets/expenses).

Verify that total debits equal total credits across all ledger accounts before preparing financial statements. Detects posting errors but not all mistakes.

Accrual: revenues/expenses recorded when earned/incurred, not when cash moves (e.g., invoice issued = revenue). Cash: recorded only when money received/paid. GAAP requires accrual.

Account that offsets another account to show net value. Example: Accumulated Depreciation (contra-asset) reduces Equipment's book value on the balance sheet.

Expenses must be matched to the revenue they help generate in the same period. Example: Record cost of goods sold in the period the inventory is sold, not when purchased.

1) Income Statement: profitability (revenue - expenses). 2) Balance Sheet: financial position (assets, liabilities, equity at a point in time). 3) Cash Flow Statement: cash movements. 4) Statement of Equity: owner's interest changes.

A liability recorded for a probable future obligation with uncertain amount/timing. Example: provision for warranty claims estimates costs to honor product guarantees.

Straight-line: equal expense each period (Asset Cost ÷ Useful Life). Accelerated (e.g., double-declining): higher expense early, lower later. Both are GAAP-compliant; choice depends on asset usage pattern.

Update accounts at period-end to reflect accrual basis: record accrued expenses (owed but unpaid), accrued revenue (earned but uncollected), prepaid adjustments, and depreciation to ensure accurate financial statements.