Chapter 4 - Accrual Accounting

Front 1

Accrual Basis Accounting:

Back 1

Acct'g basis in which transactions that change a company's financial statements are recorded in the periods in which the events occur; rather than in the periods in which the company received or pays cash.

Front 2

Accrued Expenses:

Back 2

Expenses incurred but not yet paid in cash or recorded.

Front 3

Accrued Revenues:

Back 3

Revenues earned 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 adn matching 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

An accounting basis in which revenue is recorded only when cash is received and an expense is recorded only when cash is paid.

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 of its useful life.

Front 11

Fiscal Year:

Back 11

An accounting period that is one year long.

Front 12

Income Summary:

Back 12

A temporary account used in closing revenue and expense accounts.

Front 13

Matching Principle:

Back 13

The principle that dictates that the efforts (expenses) be matched with accomplishments (revenues).

Front 14

Permanent Accounts:

Back 14

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

Front 15

Post-closing Trial Balance:

Back 15

A list of permanent accounts and their balances after closing entries have been journalized and posted.

Front 16

Prepaid Expenses (Prepayments):

Back 16

Expenses paid in cash and recorded as assets before the are used or consumed.

Front 17

Revenue Recogntion Principle:

Back 17

The principle that revenue be recognized in the accounting period in which it is earned.

Front 18

Reversing Entry:

Back 18

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

Front 19

Temporary Accounts:

Back 19

Revenue, expense and dividend accounts whose balances are transferred to Retained Earnings at the end of an accounting period.

Front 20

Time Period Assumption:

Back 20

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

Front 21

Unearned Revenues:

Back 21

Cash received before revenues were earned and recoded as liabilities until they are earned.

Front 22

Useful Life:

Back 22

The length of service of a productive facility.

Front 23

Work Sheet:

Back 23

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