Accounting Language Ch3

Question 1

accrual basis of accounting

Answer 1

– Revenues and expenses are reported in the income statement in the period in which they are earned or incurred. (p. 100)

Question 2

accrued expenses

Answer 2

Expenses that have been incurred but not recorded in the accounts.

Question 3

accrued revenues

Answer 3

– Revenues that have been earned but not recorded in the accounts

Question 4

accumulated depreciation

Answer 4

The contra asset account credited when recording the depreciation of a capital asset.

Question 5

adjusted trial balance

Answer 5

The trial balance prepared after all the adjusting entries have been posted

Question 6

adjusting entries

Answer 6

The journal entries that bring the accounts up to date at the end of the accounting period

Question 7

adjusting process

Answer 7

An analysis and updating of the accounts before financial statements are prepared

Question 8

amortization/

depreciation

Answer 8

The systematic periodic transfer of the cost of a depreciable asset to an expense account during its expected useful life

Question 9

capital assets

Answer 9

Long-term or relatively permanent tangible and intangible assets that are used in normal business operations

Question 10

carrying amount of the asset /

net book value

Answer 10

The difference between the cost of a capital asset and its accumulated depreciation

Question 11

cash basis of accounting

Answer 11

Revenues and expenses are reported in the income statement in the period in which cash is received or paid

Question 12

contra accounts

Answer 12

Accounts that are offset against another account

Question 13

depreciate

Answer 13

depreciate – Decreasing in usefulness over time for all capital assets, except land

Question 14

depreciation expense

Answer 14

– The portion of the cost of a depreciable asset that is recorded as an expense each year of its useful life

Question 15

notes payable

Answer 15

– Written promises to pay an amount and interest at an agreed-upon rate

Question 16

notes receivable

Answer 16

– Customers’ written promises to pay company an amount and interest at an agreed-upon rate

Question 17

prepaid expenses

Answer 17

– Items such as sup¬plies that will be used in the business in the future

Question 18

revenue recognition principle

Answer 18

– The accounting concept that supports reporting revenues when the services are provided to customers

Question 19

time period concept

Answer 19

– The account-ing concept that assumes that the economic life of the business can be divided into time periods

Question 20

unearned revenues

Answer 20

– The liability created by receiving cash in advance of earning the revenue