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26 Cards in this Set

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Define accounting period issue.
the difficulty of assigning revenues and expenses to a short period of time.
Define accrual.
the recognition of an expense or revenue that has arisen but has not yet been recorded.
Define accrual accounting.
the attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur, rather than only in the period in which cash is received or paid by the business; all the techniques developed by accountants to apply the matching rule.
Define accrued expenses.
expenses incurred but not recognized in the accounts; unrecorded expenses.
define accrued revenues.
revenues for which a service has been performed or goods delivered but for which no entry has been made; unrecorded revenues.
Define accumulated depreciation accounts.
contra-asset accounts used to accumulate the depreciation expense of specific long-lived assets.
Define adjusted trial balance.
a trial balance prepared after all adjusting entries have been recorded and posted to the accounts.
Define adjusting entries.
entries made to apply accrual accounting to transactions that span more than one accounting period.
Define carrying value.
the unexpired portion of the cost of an asset. also called book value.
Cash basis of accounting.
accounting for revenues and expenses on a cash received and cash paid basis.
What is the continuity issue?
the difficulty associated with not knowing how long a business entity will survive.
Define contra account.
an account whose balance is subtracted from an associated account in the financial statements.
Define deferral.
the postponement of the recognition of an expense that already has been paid or of a revenue that already has been received.
Define depreciation.
the portion of the cost of a tangible long-term asset allocated to any one accounting period. also called depreciation expense.
Define expenses.
decreases in owner's equity resulting from the costs of goods and services used up in the course of earning revenues. also called cost of doing business or expired costs.
Define fiscal year.
any 12-month accounting period used by an economic entity.
What is the going concern?
the assumption, unless there is evidence to the contrary, that a business entity will continue to operate indefinitely.
what is the matching rule?
revenues must be assigned to the accounting period in which the goods are sold or the services performed, and expenses must be assigned to the accounting period in which they are used to produce revenue.
define net income.
the net increase in owner's equity that results from business operations and is accumulated in the owner's Capital account; revenues less expenses when revenues exceed expenses.
Define net loss.
the net decrease in owner's equity that results from business operations when expenses exceed revenues. It is accumulated in the owner's Capital account.
Define periodicity.
the recognition that net income for any period less than the life of the business, although tentative, is still a useful measure.
Define prepaid expenses.
expenses paid in advance that have not yet expired; an asset account.
Define profit.
the increase in owner's equity that results from business operations.
What is revenue recogition?
in accrual accounting, the process of determining when revenue is earned.
Define revenues.
increases in owner's equity resulting from selling goods, rendering services, or performing other business activities.
Define unearned revenues.
revenues received in advance for which the goods have not yet been delivered or the services performed; a liability account.