Accounting Ch. 4

Front 1

Accrual-basis accounting

Back 1

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

Front 2

Accrued expenses

Back 2

Expenses incurred but not yet paid in cash or recorded

Front 3

Accrued revenues

Back 3

Revenues for services performed but not yet received in cash or recorded.

Front 4

Adjusted trial balance

Back 4

A list of accounts and their balances after all adjustments have been made.

Front 5

Adjusting entries

Back 5

Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.

Front 6

Book value

Back 6

The difference between the cost of a depreciable asset and its related accumulated depreciation

Front 7

Cash-basis accounting

Back 7

Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.

Front 8

Closing entries

Back 8

Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders' equity account, Retained Earnings

Front 9

Contra asset account

Back 9

An account that is offset against an asset account on the balance sheet.

Front 10

Depreciation

Back 10

The process of allocating the cost of an asset to expense over its useful life.

Front 11

Earnings management

Back 11

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.

Front 12

Expense recognition principle (matching principle)

Back 12

The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.

Front 13

Fiscal year

Back 13

An accounting period that is one year long.

Front 14

Income Summary

Back 14

A temporary account used in closing revenue and expense accounts.

Front 15

Periodicity assumption

Back 15

An assumption that the economic life of a business can be divided into artificial time periods

Front 16

Permanent accounts

Back 16

Balance sheet accounts whose balances are carried forward to the next accounting period

Front 17

Post-closing trial balance

Back 17

A list of permanent accounts and their balances after a company has journalized and posted closing entries.

Front 18

Prepaid expenses (prepayments)

Back 18

Expenses paid in cash before they are used or consumed.

Front 19

Quality of earnings

Back 19

Indicates the level of full and transparent information that a company provides to users of its financial statements.

Front 20

Revenue recognition principle

Back 20

The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.

Front 21

Reversing entry

Back 21

An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.

Front 22

Temporary accounts

Back 22

Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period

Front 23

Unearned revenues

Back 23

Cash received and a liability recorded before services are performed.

Front 24

Useful life

Back 24

The length of service of a productive asset.

Front 25

Worksheet

Back 25

A multiple-column form that companies may use in the adjustment process and in preparing financial statements.