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16 Cards in this Set
- Front
- Back
accrue
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to grow or accumulate over time; for example, interest expense
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Accumulated Depreciation
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a contra-asset account shown as a deduction from the related asset account in the balance sheet. Depreciation taken throughout the useful life of an asset is accumulated in this account.
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adjusted trial balance
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a schedule indicating the balances in ledger accounts after end-of-period adjusting entries have been posted. The amounts shown in the adjusted trial balance are carried directly into financial statements.
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adjusted entries
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entries made at the end of the accounting period for the purpose of recognizing revenue and expenses that are not properly measured as a result of journalizing transactions as they occur.
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book value
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the net amount at which an asset appears in financial statements. for depreciable assets, book value represents cost minus accumulated depreciation. aka carrying value
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contra-asset account
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an account with a credit balance that is offset against or deducted from an asset account to produce the proper balance sheet amount for the asset
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depreciable assets
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physical objects with a limited life. the cost of these assets is gradually recognized as depreciation expense
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depreciation
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the systematic allocation of the cost of an asset to expense during the periods of its useful life
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immaterial
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something of little or no consequence. immaterial items may be accounted for in the most convenient manner, w/p regard 2 other theoretical concepts
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matching (principle)
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the accounting principle of offsetting revenue w/ the expenses incurred in producing that revenue. requires recognition of expenses in the periods that the goods and services are used in the effort to produce revenue
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materiality
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the relative importance of an item or amount. items significant enough to influence decisions are said to be material. items lacking this importance are considered immaterial. the accounting treatment accorded to immaterial items may be guided by convenience rather than by theoretical principles
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prepaid expenses
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assets representing advance paymetn of the expenses of future accounting periods. as time passes, adjusting entries are made to transfer the related costs from the asset account to an expense account
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realization (principle)
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the accounting principle that governes the timing of revenue recognition. bascially, the principle indicates that revenue should be recognized in the period that it is earned.
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straight-line method of depreciation
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the widely used approach of recognizing an equal amount of depreciation expense in each period of a depreciable asset's useful life
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unearned revenue
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an obligation to deliver goods or render services in the future, stemming from teh receipt of advance payment.
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useful life
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the period of time that a depreciable asset is expected to be useful to the business. this is the period over which the cost of the asset is allocated to depreciation expense
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