Chapter 3 Flashcards
The accounting concept that assumes that the economic life of the business can be divided into time periods.
accounting period concept
Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which they are earned or incurred.
accrual basis of accounting
Expenses that have been incurred but not recorded in the accounts.
accrued expenses
Revenues that have been earned but not recorded in the accounts.
accrued revenues
The contra asset account credited when recording the depreciation of a fixed asset.
Accumulated Depreciation
The trial balance prepared after all the adjusting entries have been posted.
adjusted trial balance
The journal entries that bring the accounts up to date at the end of the accounting period.
adjusting entries
An analysis and updating of the accounts when financial statements are prepared.
adjusting process
The difference between the cost of a fixed asset and its accumulated depreciation.
book value of the asset (or net book value)
Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which cash is received or paid.
cash basis of accounting
An account offset against another account.
contra accounts, or contra asset accounts
To lose usefulness as all fixed assets except land do.
depreciate
The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.
depreciation
The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.
depreciation expense
Long-term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.
Fixed assets
