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Ch 4 Accrual Accounting Concepts
Wiley Plus Acc 2010 UVU
25
Accounting
Undergraduate 3
09/19/2015

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Term
Accrual-basis accounting
Definition
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.
Term
Accrued expenses
Definition
Expenses incurred but not yet paid in cash or recorded
Term
Accrued revenues
Definition
Revenues for services performed but not yet received in cash or recorded.
Term
Adjusted trial balance
Definition
A list of accounts and their balances after all adjustments have been made.
Term
Adjusting entries
Definition
Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.
Term
Book value
Definition
The difference between the cost of a depreciable asset and its related accumulated depreciation.
Term
Cash-basis accounting
Definition
Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.
Term
Closing entries
Definition
Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders' equity account, Retained Earnings.
Term
Contra asset account
Definition
An account that is offset against an asset account on the balance sheet.
Term
Depreciation
Definition
The process of allocating the cost of an asset to expense over its useful life.
Term
Earnings management
Definition
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income
Term
Expense recognition principle (matching principle)
Definition
The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.
Term
Fiscal year
Definition
An accounting period that is one year long.
Term
Income Summary
Definition
A temporary account used in closing revenue and expense accounts.
Term
Periodicity assumption
Definition
An assumption that the economic life of a business can be divided into artificial time periods.
Term
Permanent accounts
Definition
Balance sheet accounts whose balances are carried forward to the next accounting period.
Term
Post-closing trial balance
Definition
A list of permanent accounts and their balances after a company has journalized and posted closing entries
Term
Prepaid expenses (prepayments)
Definition
Expenses paid in cash before they are used or consumed.
Term
Quality of earnings
Definition
Indicates the level of full and transparent information that a company provides to users of its financial statements.
Term
Revenue recognition principle
Definition
The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.
Term
Reversing entry
Definition
An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.
Term
Temporary accounts
Definition
Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period.
Term
Unearned revenues
Definition
Cash received and a liability recorded before services are performed.
Term
Useful life
Definition
The length of service of a productive asset.
Term
Worksheet
Definition
A multiple-column form that companies may use in the adjustment process and in preparing financial statements.
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