Chp 4. Vocabulary (Financial accounting)
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Created by:
jbarrera117 on March 1, 2011
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25 terms
Terms | Definitions |
|---|---|
 Accrual-basis accounting | Accounting basis in which companies record, in the periods in which the events occur, transactions that change a company's financial statements, even if cash was not exchanged. |
| Accrued expenses | Expenses incurred but not yet paid in cash or recorded. |
| Accrued revenues | Revenues earned but not yet received in cash or recorded. |
| Adjusted trial balance | A list of accounts and their balances after all adjustments have been made. |
| Adjusting entries | Entries made at the end of an accounting period to ensure that the revenue recognition and matching principles are followed. |
| Book value | The difference between the cost of a depreciable asset and its related accumulated depreciation. |
| Cash-basis accounting | Accounting basis in which a company records revenue only when it receives cash, and an expense only when it pays out cash. |
| 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. |
| Contra asset account | An account that is offset against an asset account on the balance sheet. |
| Depreciation | The process of allocating the cost of an asset to expense over its useful life. |
| Earnings management | The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income. |
| Fiscal year | An accounting period that is one year long. |
| Income Summary | A temporary account used in closing revenue and expense accounts. |
| Matching principle | The principle that dictates that companies match efforts (expenses) with accomplishments (revenues). |
| Permanent accounts | Balance sheet accounts whose balances are carried forward to the next accounting period. |
| Post-closing trial balance | A list of permanent accounts and their balances after a company has journalized and posted closing entries. |
| Prepaid expenses (Prepayments) | Assets that result from the payment of expenses that benefit more than one accounting period. |
| Quality of earnings | Indicates the level of full and transparent information that a company provides to users of its financial statements. |
| Revenue recognition principle | The principle that companies recognize revenue in the accounting period in which it is earned. |
| Reversing entry | An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period. |
| Temporary accounts | Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period. |
| Time period assumption | An assumption that the economic life of a business can be divided into artificial time periods. |
| Unearned revenues | Cash received before a company earns revenues and recorded as a liability until earned. |
| Useful life | The length of service of a productive asset. |
| Worksheet | A multiple-column form that companies may use in the adjustment process and in preparing financial statements. |
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