Unit 2 (FINACCT)

Account linked with another account and having an opposite normal balance.

Cost of inventory sold to customers during a period.

Cash and other assets expected to be collected, used, or sold within one year or the company’s operating cycle.

Obligations due to be paid or settled within one year or the company’s operating cycle.

Expense created by allocating the cost of plant and equipment to periods in which they are used.

Net sales minus cost of goods sold.

Inventory losses that occur as a result of theft or deterioration.

Goods that a company owns and expects to sell to customers.

Items paid for in advance of receiving their benefits.

Liability created when customers pay in advance for products or services.

If an expense is paid in advance, a debit entry is made in the prepaid expense account at the time it is paid.

When prepaid expenses are realized, an adjusting credit entry is made to prepaid expense and a debit entry is made for the relevant expense account.

At the time equipment is purchased, no expense is recorded.

When depreciation expense is recognized, the accumulated depreciation account is credited and the depreciation expense account is debited.

Unearned revenue is a liability account.