Ch 3 Adjusting the Accounts Flashcards
accrual basis accounting
A basis for accounting in which revenues are recorded when earned and expenses are recorded when incurred. (p. 117)
accrued expenses
Expenses incurred but not yet paid in cash or recorded. (p. 129)
accrued revenues
Revenues earned but not yet paid in cash or recorded. (p. 129)
accumulated depreciation
The cumulative sum of the depreciation expense since the asset was purchased. (p. 124)
adjusted trial balance
A list of accounts and their balances after all adjustments have been posted. (p. 135)
adjusting entries
Entries made at the end of an accounting period to ensure that the revenue and expense recognition criteria are followed. (p. 119)
carrying amount
The difference between the cost of a depreciable asset and its accumulated depreciation; in other words, it is the unallocated or unexpired portion of the depreciable asset’s cost. (p. 125)
cash basis accounting
A basis for accounting in which revenue is recorded when cash is received and an expense is recorded when cash is paid. (p. 117)
contra asset account
An account with the opposite balance (credit) compared with its related asset account, which has a debit balance. A contra set is deducted from the related asset on the balance sheet. (p. 124)
depreciation
The allocation of the cost of a long-lived asset to expense over its useful life in a rational and systematic manner. (p. 123)
fiscal year
An accounting period that is one year long. It does not need to start and end on the same days as the calendar year. (p. 116)
interim periods
Accounting time periods that are less than one year long, such as a month or a quarter of a year. (p. 116)
matching concept
Dictates that efforts (expenses) must match results (revenues). (p. 118)
principal
The amount borrowed or the amount still owed on a loan, separate from interest. (p. 130)
revenue recognition principle
Provides guidance about when to record revenue. In general, it is recorded when the performance obligation has been satisfied, that is, the service has been performed or the goods sold and delivered. (p. 118)
