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20 Cards in this Set
- Front
- Back
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Cash basis accounting |
Accounting method that record revenues only when cash is received and expenses only when cash is paid. |
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Accrual basis accounting |
Accounting method that record revenues when earned and expenses when incurred. |
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Time Period Concept |
Assumes that a business' activities can be sliced into small time segments and that financial statements can be prepared for specific periods, such as a month, quarter, or year. |
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Fiscal year |
An accounting year of any 12 consecutive months that may or may not coincide with the calendar year. |
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Revenue recognition principle |
Requires companies to record Revenue when it has been earned and determines the amount of Revenue to record. This principle requires companies to record Revenue when it has been earned, but not before. |
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Matching principle |
Guides accounting for expenses, ensures that all expenses are recorded when they are incurred during the period and matches those expenses against the revenues of the period. |
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Adjusting entry |
Entry made at the end of the accounting period that is used to record revenues to the period in which they are earned and expenses to the period in which they occur. |
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Deferred expense |
An asset created when a business makes Advance payments of future expenses. |
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Plant asset |
Long-lived, tangible asset, such as land, buildings, and equipment, used in the operation of a business. |
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Depreciation |
The process by which businesses spread the allocation of a plant assets cost over its useful life. |
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Residual value |
The expected value of a depreciable asset at the end of its useful life. |
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Straight-line method |
The depreciation method that allocates an equal amount of depreciation each year (cost - residual value) / useful life |
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Accumulated depreciation |
The sum of all the depreciation expense recorded to date for a depreciable asset. |
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Contra account |
An account that is paired with, and listed immediately after, it's related account in the chart of accounts and Associated financial statement and whose normal balance is the opposite of the normal balance of the related account. |
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Book value |
A depreciable assets cost minus accumulated depreciation |
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Deferred revenue |
A liability created when a business collects cash from the customers in advance of completing a service or delivering a product. Unearned Revenue |
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Accrued expense |
An expensive the business has incurred but has not yet paid. |
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Accrued Revenue |
A revenue that has been earned but for which the cash has not yet been collected. This amount will go in accounts receivable. |
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Adjusted trial balance |
A list of all the accounts with their adjusted balance. |
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Worksheet |
An internal document that helps summarize data for the preparation of financial statements. |
