Financial Accounting - Chapter 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 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 and 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

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

Fiscal year

Back 12

An accounting period that is one year long.

Front 13

Income Summary

Back 13

A temporary account used in closing revenue and expense accounts.

Front 14

Matching principle

Back 14

The principle that dictates that companies match efforts (expenses) with accomplishments (revenues).

Front 15

Permanent accounts

Back 15

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

Front 16

Post-closing trial balance

Back 16

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

Front 17

Prepaid expenses (Prepayments)

Back 17

Assets that result from the payment of expenses that benefit more than one accounting period.

Front 18

Quality of earnings

Back 18

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

Front 19

Revenue recognition principle

Back 19

The principle that companies recognize revenue in the accounting period in which it is earned.

Front 20

Reversing entry

Back 20

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

Front 21

Temporary accounts

Back 21

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

Front 22

Time period assumption

Back 22

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

Front 23

Unearned revenues

Back 23

Cash received before a company earns revenues and recorded as a liability until earned.

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.