account format 168
A balance-sheet format that lists assets on the left and liabilities and stockholders' equity on the right.
An expense or a revenue that occurs before the business pays or receives cash. An accrual is the opposite of a deferral.
accrual accounting 139
Accounting that records the impact of a business event as it occurs, regardless of whether the transaction affected cash.
accrued expense 150
An expense incurred but not yet paid in cash.
accrued revenue 151
A revenue that has been earned but yet received in cash.
accumulated depreciation 148
The cumulative sum of all depreciation expense from the date of acquiring a plant asset.
adjusted trial balance 156
A list of all the ledger accounts with their adjusted balances.
book value (of a plant asset) 149
The asset's cost minus accumulated depreciation.
cash-basis accounting 139
Accounting that records only transactions in which cash is received or paid.
classified balance sheet 167
A balance sheet that shows current assets separate from long-term assets, and current liabilities separate form long-term liabilities.
closing the books 165
The process of preparing the accounts to begin recording the next period's transactions. Closing the accounts consists of journalizing and posting the closing entries to set the balances of the revenue, expense, and dividends accounts to zero. Also called closing the accounts.
closing entries 165
Entries that transfer the revenue, expense, and dividends balances from these respective accounts to the Retained Earnings account.
contra account 149
An account that always has a companion account and whose normal balance is opposite that of the companion account.
current asset 167
An asset that is expected to be converted to cash, sold, or consumed during the next 12 months, or within the business's normal operating cycle if longer than a year.
current liability 167
A debt due to be paid within one year or within the entity's operating cycle if the cycle is longer than a year.
current ratio 170
Current assets divided by current liabilities. Measures a company's ability to pay current liabilities with current assets.
debt ratio 170
Ratio of total liabilities to total assets. States the proportion of a company's assets that is financed with debt.
An adjustment for which the business paid or received cash in advance. Examples include prepaid rent, prepaid insurance, or supplies.
Allocation of the cost of a plant asset to expense over its useful life.
Measure of how quickly an item can be converted to cash.
long-term asset 167
An asset that is not a current asset.
long-term liability 167
A liability that is not a current liability.
matching principle 141
The basis for recording expenses. Directs accountants to identify all expenses incurred during the period, to measure the expenses, and to match them against the revenues earned during that same period.
multi-step income statement 169
An income statement that contains subtotals to highlight important relationships between revenues and expenses.
operating cycle 167
Time span during which cash is paid for goods and services that are sold to customers who pay the business in cash.
permanent accounts 165
Asset, liability, and stockholders' equity accounts that are not closed at the end of the period.
plant assets 147
Long-lived assets, such as land, buildings, and equipment, used in the operation of the business. Also called fixed assets.
prepaid expense 145
A category of miscellaneous assets that typically expire or get used up in the near future. Examples include prepaid rent, prepaid insurance, and supplies.
report format 168
A balance-sheet format that lists assets at the top, followed by liabilities and stockholders' equity below.
revenue principle 140
The basis for recording revenues; tells accountants when to record revenue and the amount of revenue to record.
single-step income statement 169
An income statement that lists all the revenues together under a heading such as Revenues or Revenues and Gains. Expenses appear in a separate category called the Expenses or perhaps Expenses and Losses.
temporary accounts 165
The revenue and expense accounts that relate to a limited period and are closed at the end of the period are temporary accounts. For a corporation, the Dividends account is also temporary.
time-period concept 140
Endures that accounting information is reported at regular intervals.
unearned revenue 152
A liability created when a business collects cash from customers in advance of earning the revenue. The obligation is to provide a product or a service in the future.