Ch 4: Adjustments, Financial Statements, and Quality of Earnings
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13 terms
Terms | Definitions |
|---|---|
 Accounting Cycle | The process used by entities to analyze and record transactions, adjust the records at the end of the period, prepare financial statements, and prepare the records for the next cycle |
| Accrued Expenses | Previously unrecorded expenses that need to be adjusted at the end of the accounting period to reflect the amount incurred and its related payable account |
| Accrued Revenues | Previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and its related receivable account |
| Adjusting Entries | Entries necessary at the end of the accounting period to measure all revenues and expenses of that period |
| Closing Entry | Made at the end of the accounting period to transfer balances in temporary accounts to Retained Earnings and to establish a zero balance in each of the temporary accounts |
| Contra-Account | An account that is offset to, or reduction of, the primary account (depreciation) |
| Differed Expense | Previously acquired assets that need to be adjusted at the end of the accounting period to reflect the amount of expense incurred in using the asset to generate revenue |
| Deferred (Unearned) Revenues | Previously recorded liabilities that need to be adjusted at the end of the accounting period to reflect the amount of revenue earned; on the balance sheet, revenues that have been collected but not earned; liabilities until the goods or services have been provided |
| Net Book Value (Book Value, Carrying Value) | The acquisition cost of an asset less accumulated depreciation, depletion, or amortization |
| Permanent (Real) Accounts | The balance sheet accounts that carry their ending balances into the next accounting period |
| Post-Closing Trial Balance | Prepared as the last step in the accounting cycle to check that debits equal credits and all temporary accounts have been closed |
| Temporary (Nominal) Accounts | Income statement (and sometimes dividends declared) accounts that are closed to Retained Earnings at the end of the accounting period |
| Trial Balance | A list of all accounts with their balances to provide a check on the equality of the debits and credits |
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