Chapter 3 Key Words Flashcards
Record revenues when goods and services are provided to customers, and record expenses for the costs used to provide those goods and services to customers
accrual-basis accounting
Record revenue in the period in which we provide goods and services to customers.
revenue recognition principle
Record revenues at the time cash is received and expenses at the time cash is paid.
cash-basis accounting
Entries at the end of the period used to update balances of revenues and expenses (and changes in their related assets and liabilities) that have occurred during the period but that we have not yet recorded
adjusting entries
Arise when a company pays cash (or has an obligation to pay cash) to acquire an asset that is not used until a later period.
prepaid expenses
The process of allocating the cost of a long-term asset to expense over its useful life
depreciation
An account with a balance that is opposite, or “contra,” to that of its related accounts
contra account
An asset’s original cost less accumulated depreciation.
book value
Arise when a company receives cash in advance from customers, but goods and services won’t be provided until a later period.
deferred revenues
Occur when a company provides products or services but hasn’t yet received cash.
accrued revenues
A list of all accounts and their balances after we have updated account balances for adjusting entries.
adjusted trial balance
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
classified balance sheet
All accounts that appear in the balance sheet; account balances are carried forward from period to period.
permanent 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.
temporary accounts
A list of all accounts and their balances at a particular date after we have updated account balances for closing entries.
post-closing trial balance
occur when a company has used costs in the current period, but the company hasn’t yet paid cash for those costs
accrued expenses
entries that transfer the balances of all temporary accounts (revenues, expenses, and dividends) to the balance of the retained earnings account
closing entries
