Chapter 4 GLOSSARY REVIEW Flashcards
What is the adjusted trial balance?
A list of accounts and their balances after all adjustments have been made.
What is adjusting entries?
Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.
What is book value?
The difference between the cost of a depreciable asset and its related accumulated depreciation.
What is cash-basis accounting?
Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.
What are the closing entries?
Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders’ equity account, Retained Earnings.
What is the contra asset account?
An account that is offset against an asset account on the balance sheet.
What is depreciation?
The process of allocating the cost of an asset to expense over its useful life.
What is earnings management?
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.
What is the expense recognition principle or the (matching principle)?
The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.
What is the fiscal year?
An accounting period that is one year long.
What is the income summary?
A temporary account used in closing revenue and expense accounts.
What is a worksheet?
A multiple-column form that companies may use in the adjustment process and in preparing financial statements.
What is the useful life?
The length of service of a productive asset.
What are unearned revenues?
Cash received and a liability recorded before services are performed.
What are the temporary accounts?
Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period.
