CHAPTER 2 VOCABULARY Flashcards
Accounts receivable
Expected future cash receipt arising from permitting a customer to buy now and pay leter
Accrual
Recognition of events before exchanging cash
Accrual accounting
Accounting system that recognizes revenues when earned and experiences, when incurred regardless of when the related cash is exchanged
Accruaded expenses
Expenses that are recognized before cash is paid
Adjusting entry
Entry that updates account balances prior to preparing financial statements
Claims exchange transaction
When one claim decreases an another increases so that total claims do not change.
Example, the accrual of interest expense is a claims exchange transcations, liabilities increase, and the recognition of the expense causes retained earnings to decrease
Cost
Amount paid to acquire a resource or to pay for a resource that has been consumed. Cost results in asset exchange or expense recognition
Deferral
Recognition of revenue or expense in a period after the cash is exchanged
Expense
Economic sacrifies that are incurred in the process of generating revenue
Period Costs
General, selling, and administrative costs that are expensed in the period in which the economic sacrifice is made
Prepaid items
Deferred expenses. Example, prepaid insurance
Salaries payable
Amounts owed but not yet paid to employess for services they have already performed
Unearned revenue
Liability arising when costumers pay cash in advance for services a business will perform in the future
