Chapter 3 Flashcards
What is accrued expense?
When a company has incurred an expense but hasn’t yet paid cash or recorded an obligation to pay.
What is accrual-basis accounting?
Record revenues when earned (revenue recognition) and expenses with related revenues (expense recognition).
What is accrued revenue?
When a company has earned revenue but hasn’t yet received cash or recorded an amount receivable.
What is adjusted trial balance?
A list of all accounts and their balances after we have updated account balances for adjusting entries.
What are adjusting entries?
Entries used to record events that occur during the period that have not yet been recorded by the end of the period.
What is book value?
An asset’s original cost less accumulated depreciation.
What is cash-basis accounting?
Record revenues at the time cash is received and expenses at the time cash is paid.
What is a classified balance sheet?
Balance sheet that groups a company’s assets into current assets and long-term assets and that separates liabilities into current liabilities and long-term liabilities.
What are closing entries?
Entries that transfer the balances of all temporary accounts (revenues, expenses, and dividends) to the balance of the Retained Earnings account.
What is a contra account?
An account with a balance that is opposite, or “contra,” to that of its related accounts.
What is depreciation?
The process of allocating the cost of a long-term asset to expense over its useful life.
What is a matching principle?
Recognize expenses in the same period as the revenues they help to generate.
What are permanent accounts?
All accounts that appear in the balance sheet; account balances are carried forward from period to period.
What is a post-closing trial balance?
A list of all accounts and their balances at a particular date after we have updated account balances for closing entries.
What are prepaid expenses?
The costs of assets acquired in one period that will be expensed in a future period.
What is the revenue recognition principle?
Record revenue in the period in which it’s earned.
What are temporary accounts?
All revenue, expense, and dividend accounts; account balances are maintained for a single period and then closed (or zeroed out) and transferred to the balance of the Retained Earnings account at the end of the period.
What are unearned revenues?
When a company receives cash in advance from a customer for products or services to be provided in the future.
