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Accounting 201 - Chapter 4
Terms in this set (24)
An assumption that the economic life of a business can be divided into artificial time periods.
Revenue Recognition Principle
The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.
Expense Recognition Principle
The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.
Accural 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.
Cash Basis Accounting
Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.
Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.
Expenses paid in cash before they are used or consumed.
The length of service of a productive asset.
The process of allocating the cost of an asset to expense over its useful life.
Contra Asset Account
An account that is offset against an asset account on the balance sheet.
The difference between the cost of a depreciable asset and its related accumulated depreciation.
Cash received and a liability recorded before services are performed.
Revenues for services performed but not yet received in cash or recorded.
Expenses incurred but not yet paid in cash or recorded.
Adjusted Trial Balance
A list of accounts and their balances after all adjustments have been made.
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.
Quality of Earnings
Indicates the level of full and transparent information that a company provides to users of its financial statement.
Revenue, expenses, and dividend accounts whose balances a company transfers to Retained Earnings at the end of the accounting period.
Balance sheets accounts whose balances are carried forward to the next accounting period.
Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders' equity account, Retained Earnings.
A temporary account used in closing revenue and expense accounts.
Post Closing Trial Balance
A list of permanent accounts and their balances after a company has journalized and posted closing entries.
An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.
A multiple-column form that companies may use in the adjustment process and in preparing financial statements.
Recommended textbook explanations
Glencoe Accounting: First Year Course
Loose-leaf for Managerial Accounting
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Cost Accounting: A Managerial Emphasis
Charles T. Horngren, Srikant M. Datar
Horngren's Financial & Managerial Accounting
Brenda L Mattison, Ella Mae Matsumura, Tracie Miller-Nobles
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