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24 Cards in this Set
- Front
- Back
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Recognition
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The process of recording an item in the financial statements as an asset, a liability, a revenue, an expense, or the like
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Historical cost
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The amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets
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Current value
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The amount of cash or its equivalent that could be received by selling an asset currently
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Cash Basis
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A system of accounting in which revenues are recognized when cash is received and expenses are recognized when cash is paid
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Accrual basis
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A system of accounting in which revenues are recognized when earned and expenses are recognized when incurred
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Revenues
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Inflows of assets or settlements of liabilities from delivering or producing goods, rendering services, or conducting other activities
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Revenue recognition principle
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Revenues are recognized in the income statement when they are realized, or realizable, and earned
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Matching principle
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the association of revenue of a period with all of the costs necessary to generate that revenue
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Expenses
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Outflows of assets or incurrences of liabilities resulting from delivering goods, rendering services, or carrying out other activities
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Adjusting entries
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Journal entries made at the end of a period by a company using the accrual basis of accounting.
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Straight-line method
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The assignment of an equal amount of depreciation to each period
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Contra account
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An account with a balance that is opposite that of a related account
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Deferral
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Cash has been paid or received but expenses or revenue has not yet been recognized
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Deferred expense
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An asset resulting from the payment of cash before the incurrence of expense
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Deferred revenue
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A liability resulting from the receipt of cash before the recognition of revenue
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Accrual
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Cash has not yet been paid or received but expense has been incurred or revenue earned
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Accrued liability
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A liability resulting from the recognition of an expense before the payment of cash
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Accrued asset
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An asset resulting from the recognition of a revenue before the receipt of cash
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Accounting cycle
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A series of steps performed each period and culminating with the preparation of a set of financial statements
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Work sheet
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A device used at the end of the period to gather the information needed to prepare financial statements without actually recording and posting adjustments
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Real accounts
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The name given to balance sheet accounts because they are permanent and are not closed at the end of the period
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Nominal accounts
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the name given to revenue, expense, and dividend accounts because they are temporary and are closed at the end of the period
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Closing entries
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Journal entries made at the end of the period to return the balance in all nominal accounts to zero and transfer the net income or loss and the dividends to Retained Earnings
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Interim statements
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Financial statements prepared monthly, quarterly, or at other intervals less than a year in duration
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