Chapter 3 Flashcards
accrual
Expenses and revenues that gradually accumulate throughout an accounting period.
accrual basis
The accounting process whereby revenues are measured and recorded as earned, while expenses are recorded as incurred.
accrued expenses
Unpaid expenses that have already been incurred.
accrued revenues
Revenues that have been earned and recorded, but are not as yet collected.
adjusted trial balance
A trial balance prepared after adjusting entries have been prepared and posted to the ledger.
adjusting process
To analyze account balances and update them at the end of an accounting period to reflect the correct measure of revenues and expenses.
book value
Cost minus accumulated depreciation; the net amount at which an asset is reported on the balance sheet.
cash basis
An accounting approach where revenue is recorded when cash is received (no matter when “earned”), and expenses are recognized when paid (no matter when “incurred”).
contra asset
An account that is subtracted from a related account – contra accounts have opposite debit/credit rules.
depreciation
The process used to allocate the cost of a long-lived property to the accounting periods benefited.
fiscal year
A one-year accounting period that does not correspond to a calendar year.
matching principle
To associate expenses with revenue, and record them in simultaneous accounting periods.
modified cash basis
Like the cash basis, except that certain large expenditures for durable assets may be recorded as assets initially.
natural business year
Applicable to certain businesses that have a seasonal business pattern, and an attempt is made to establish an accounting fiscal year to match.
periodicity assumption
An accounting assumption that purports to divide a continuous business process into measurement intervals, such as months, quarters, and years.
