Chapter 3 Vocab Flashcards
Accrual-basis accounting
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.
Accrued expenses
Occur when a company has used costs in the current period, but the company hasn’t yet paid cash for those costs.
Accrued revenues
Occur when a company provides products or services but hasn’t yet received cash.
Adjusted trial balance
A list of all accounts and their balances after we have updated account balances for adjusting entries.
Adjusting entries
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.
Book value
An asset’s original cost less accumulated depreciation.
Cash-basis accounting
Record revenues at the time cash is received and expenses at the time cash is paid.
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.
Closing entries
Entries that transfer the balances of all temporary accounts (revenues, expenses, and dividends) to the balance of the Retained Earnings account.
Contra account
An account with a balance that is opposite, or ‘contra,’ to that of its related accounts.
Deferred revenues
Arise when a company receives cash in advance from customers, but goods and services won’t be provided until a later period.
Depreciation
The process of allocating the cost of a long-term asset to expense over its useful life.
Permanent accounts
All accounts that appear in the balance sheet; account balances are carried forward from period to period.
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.
Prepaid expenses
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.
Revenue recognition principle
Record revenue in the period in which we provide goods and services to customers.
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.
