Accounting 201Chapter 03 Key Words Flashcards
Accrual-basis accounting
Record revenues when earned (the revenue recognition principle) and expenses with related revenues (the matching principle).
Accrued expense
When a company has incurred an expense but hasn’t yet paid cash or recorded an obligation to pay.
Accrued revenue
When a company has earned revenue but hasn’t yet received cash or recorded an amount receivable.
Adjusted trial balance
A list of all accounts and their balances after we have updated account balances for adjusting entries.
Adjusting entries
Entries used to record events that occur during the period but that have not yet been recorded by the end of the period.
Cash-basis accounting
Record revenues at the time cash is received and expenses at the time cash is paid.
Classified balance sheet
Balance sheet that groups a company’s assets into current assets and long-term assets and that separates liabilities into current liabilities and long-term liabilities.
Closing entries
Entries that transfer the balances of all temporary accounts (revenues, expenses, and dividends) to the balance of the Retained Earnings account.
Contra account
An account with a balance that is opposite, or “contra,” to that of its related accounts.
Matching principle
Recognize expenses in the same period as the revenues they help to generate.
Operating cycle
The average time between purchasing or acquiring inventory and receiving cash proceeds from its sale.
Permanent accounts
All accounts that appear in the balance sheet; account balances are carried forward from period to period.
Post-closing trial balance
A list of all accounts and their balances at a particular date after we have updated account balances for closing entries.
Prepaid expenses
The costs of assets acquired in one period that will be expensed in a future period.
Revenue recognition principle
Record revenue in the period in which it’s earned.
