Acct Final Exam

Cash Basis Accounting
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Terms in this set (26)
Cash Basis Accounting
accounting system that recognizes revenues when cash is received and records expenses when cash is paid
Accrual Basis Accounting
accounting system that recognizes revenues when earned and expenses when incurred; the basis for GAAP
Revenue Recognition Principle
prescribing that revenue is recognized when earned
Matching (or Expense Recognition) Concept
prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses
Adjusting Entries
journal entry at the end of an accounting period to bring an asset or liability account to its proper amount
Deferral
delay in recognition of an expense that has been paid or revenue that has been received
Accrual
recognition of an expense that has not been paid or revenue that has not been received
Prepaid Expense
assets that represent of prepayments of future expenses
Unearned Revenue
liability created when customer pay in advance for products or services; earned when the products of services are later delivered
Accrued Expenses
costs incurred in a period that are both unpaid and unrecorded; adjusting entries involve increasing expenses and increasing liabilities
Accrued Revenuesrevenues earned in a period that are both unrecorded and not yet received in cash (or other assets); adjusting entries involve increasing assets and increasing revenuesContra-assetan account linked with another account, it has an opposite normal balance, and it is reported as a subtraction from that other account's balanceAdjusted Trial Balancelist of accounts and balances prepared after adjusting entries have been recorded and posted to the ledgerCurrent Assetscash and other assets expected to be sold, collected, or used within one year or the company's operation cycle, whichever is longerLong-term Investmentslong-term assets not used in operating activities such as noted receivable and investments in stocks and bondsPlant Assettangible long-lived assets used to produce or sell products and services, also called fixed assets, property, plant and equipmentIntangible Assetlong-term assets used to produce or sell products or services; usually lack physical form and have uncertain benefitsCurrent Liabilitiesobligations due to be paid or settled within one year or the company's operating cycle, whichever is longerLong-term Liabilitiesobligations not due to be paid or settled within one year or the company's operating cycle, whichever is longerPermanent or Real Accountsaccounts that reflect activities related to one or more future periods; balance sheet accounts whose balances are not closed; are also called Real AccountsTemporary or Nominal Accountsaccounts used to record revenues, expenses, and withdrawal (dividends for a corp.); they are closed at the end of each period; also called nominal accountsClosing Entriesentries recorded at the end of each accounting period to transfer end-of-period balances in revenue, gain, expense, loss, and withdrawal (dividends for a corp.) accounts to the capital account (to retained earnings for a corp.)Income Summarytemporary account used only in the closing process to which the balances of revenue and expense accounts (including any gains or loses) are transferred; its balance in transferred to the capital account (or retained earnings for a corp.)Post-closing Trial Balancelist of permanent accounts and their balances from the ledger after all the closing entries are journalized and postedFiscal YearConsecutive 12 month or 52 week period chosen as the organization's annual accounting periodNatural Business Year12-month period that ends when a company's sales activities are at their lowest point