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32 Cards in this Set

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  • Back
accounts receivable
Expected future cash receipts arising from permitting customers to buy now and pay later; typically relatively small balances due within a short time period.
Accounting recognition of revenue or expense in a period before cash is exchanged.

accrual accounting

Accounting system which recognizes revenues when earned and expenses when incurred regardless of when the related cash is exchanged.

adjusting entry
Entry that updates account balances prior to preparing financial statements; a bookkeeping tool. Adjusting entries never affect the Cash account.
American Institute of Certified Public Accountants (AICPA)
National association that serves the educational and professional interests of members of the public accounting profession; membership is voluntary.
asset exchange transaction
A transaction, such as the purchase of land with cash, that decreases one asset and increases another asset; total assets remain unchanged
asset source transaction
A transaction that increases both an asset and a claim on assets; the three types of asset source transactions are acquisitions from owners (equity), borrowings from creditors (liabilities), or earnings from operations (revenues).
asset use transaction
A transaction that decreases both an asset and a claim on assets; the three types of asset use transactions are distributions (transfers to owners), liability payments (to creditors), or expenses (costs incurred to operate the business).
carrying value
Face amount of a bond liability less any unamortized bond discount or plus any unamortized bond premium.
claims exchange transaction
A transaction that decreases one claim and increases another claim; total claims remain unchanged. For example, accruing interest expense is a claims exchange transaction; liabilities increase, and the expense recognition decreases retained earnings.
Code of Professional Conduct
Guidelines established by the American Institute of Certified Public Accountants (AICPA) to promote ethical con-duct among certified public accountants; AICPA members agree to adhere to this code, which goes beyond legal requirements.
A principle that guides accountants in uncertain circumstances to select the alternative that produces the lowest amount of net income.
An amount paid to acquire a resource (asset) or to pay for a resource that has been consumed. Incurring a cost results in an asset exchange or expense recognition.
Accounting recognition of revenue or expense in a period after cash is exchanged.
depreciation expense
Portion of the original cost of a long-term tangible asset allocated to an expense account in a given period.
An economic sacrifice (decrease in assets or increase in liabilities) that is incurred in the process of generating revenue.
internal controls
Policies and procedures companies establish to provide reasonable assurance of reducing fraud, providing reliable accounting records, and accomplishing organization objectives.
matching concept
Accounting principle of recognizing expenses in the same accounting period as the revenues they produce, using one of three methods: match expenses directly with revenues (e.g. , cost of goods sold); match expenses to the period in which they are incurred (e.g. , rent expense), and match expenses systematically with revenues (e.g. , depreciation expense).
An element of the fraud triangle that recognizes weaknesses in internal controls that enable the occurrence of fraudulent or unethical behavior.
period costs
Expenses recognized in the period in which they are incurred regardless of when cash payments for them are made ; costs that cannot be directly traced to products.
prepaid items
Deferred expenses. An example is prepaid insurance.
An element of the fraud triangle that recognizes conditions that motivate fraudulent or unethical behavior.
An element of the fraud triangle that recognizes a human tendency to justify fraudulent or unethical behavior.
Accounting term that usually refers to actual cash collection (e.g., collecting accounts receivable).
Reporting an accounting event in the financial statements.
The economic benefit (increase in assets or decrease in liabilities) gained by providing goods or services to customers.
salaries payable
Amounts owed but not yet paid to employees for services they have already performed.
salvage value
Expected selling price of an asset at the end of its useful life.
straight-line depreciation
Depreciation computations that produce equal amounts of depreciation to allocate to expense each period over an asset’s life; computed by subtracting the salvage value from the asset’s cost and then dividing by the number of years of useful life.
unearned revenue
Liability arising when customers pay cash in advance for services a business will perform in the future.
useful life
The period of time over which an asset is expected to be used in the normal operation of a business.
vertical statements model
Concurrent representation of several financial statements shown vertically on a page.