Accounting Vocabulary Flashcards
REVENUE RECOGNITION PRINCIPLE
recording revenues when they are earned by providing goods/service to customers
ACCRUAL ACCOUNTING
Records revenue when earned and expenses when incurred without regard to when cash is exchanged
FISCAL YEAR
12 month period business chooses for accounting year
MATCHING PRINCIPLE
- Recording expenses in the time period they were incurred to produced revenues
- matching expenses against revenues earned in same period
CASH ACCOUNTING
Records revenue when cash is received and expenses when cash is paid
ACCRUALS
Revenues earned or expenses incurred before cash is exchanged
DEFERRALS
Cash received or paid before revenues have been earned or expenses have been incurred
ADJUSTING ENTRIES
journal entries made at the end of the accounting period to measure the period’s income accurately and bring related assets and liability accounts to correct balances before financial statements are prepared
UNEARNED REVENUE / DEFERRED REVENUE
Liability created when a business collects cash from customers in advance of producing G/S
PREPAID EXPENSE / DEFERRED EXPENSE
Amounts that are assets of a business bc they represent items that b have been paid for but will be used later
UNADJUSTED TRIAL BLANCE
- A trial balance prepared at the end of the accounting period
- Made before the adjusting entries are made
ACCRUED EXPENSES
Expense that have been incurred before being paid
MATERIALITY
Company must perform strictly proper accounting only for items that are significant (could change a financial decision) for the business’s financial statements
LONG TERM ASSETS
Long lived tangible assets used for over a year
- land / building / equipment / furniture
DEPRECIATION
Allocation of the cost of a long term asset to Expense over its useful life
STRAIGHT LINE (SL) DEPRECIATION
Method of estimating depreciation
(Cost of the asset - Salvage value) / useful life of asset
SALVAGE VALUE
Estimated value of a long term asset at the end of its useful life
ACCUMULATED DEPRECIATION
A contra-asset account that reflects all the depreciation recorded for an asset to date
CONTRA ACCOUNT
- An account that is linked to another account
- has a normal balance opposite that of the account it is linked to
NET VAULE
Amount found by subtracting the balance of the contra account from the balance of the account it is linked to
BOOK VALUE / CARRYING VAULE
asset cost - accumulated depreciation
ADJUST TRIAL BALANCE
a list of all accounts of a business with their adjusted balances
CLOSING ENTRIES
- Journal entries prepared at the end of the accounting period to zero out the revenue! Expense, and dividend accounts
TEMPORARY ACCOUNTS
Revenue, expense, and dividend accounts; CLOSED at the end of the accounting period
