Length of time covered by periodic financial statements and other reports; also called reporting period.

Accrual basis accounting

Accounting system that recognizes revenues when earned and expenses when incurred; the basis for GAAP.

Costs incurred in a period that are both unpaid and unrecorded; adjusting entries for recording these items involve increasing (debiting) expenses and increasing (crediting) liabilities.

Revenues earned in a period that are both unrecorded and not yet received in cash; adjusting entries for recording these items involve increasing (debiting) assets and increasing (crediting) revenues.

Adjusted trial balance

List of accounts and balances prepared after adjustments are recorded and posted to the ledger.

Journal entry at the end of an accounting period to bring an asset or liability account to its proper amount while also updating the related revenue or expense account.

Annual financial statements

Financial statements covering a one-year period; often based on a calendar year, but any twelve consecutive month period is acceptable.

Equals the assets original cost less its accumulated depreciation.

Cash basis accounting

Revenues are recognized when cash is received and expenses when cash is paid.

Account linked with another account and having the opposite normal balance; reported as a subtraction from the other account's balance.

Expense created by allocating the cost of plant and equipment to the periods in which they are used; represents the expense of using the assets.

consecutive 12 months (or 52 weeks) chosen as an organization's annual accounting period.

Interim financial statements

Financial statements covering periods of less than one year; usually based on one- or three- or six-month periods.

Expense recognition (or matching) principle

Requires expenses to be recorded in the same period as the revenues that were earned as result of the expenses.

Natural business year

12-month period that eneds when a company's sales activities are at their lowest point.

Tangible long-lived assets used to produce or sell products and services; also called plant assets or fixed assets.

Items paid for in advance of receiving their benefits; classified as assets.

Ratio of a company's net income to its revenues; measures the portion of profit in each dollar of revenue.

Straight-line depreciation method

Allocates equal amounts of an asset's cost to depreciation expense during its useful life.

Time-period principle

Assumes activities of an organization can be divided into specific time periods such as months, quarters, or years.

Unadjusted trial balance

List of accounts and balances prepared before adjustments have been recorded and posted.

Cash received in advance of providing products or services; a liability.

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AcctCh3

Dual-Credit Accounting Chapter 3

Term	Definition
Accounting period	Length of time covered by periodic financial statements and other reports; also called reporting period.
Accrual basis accounting	Accounting system that recognizes revenues when earned and expenses when incurred; the basis for GAAP.
Accrued expenses	Costs incurred in a period that are both unpaid and unrecorded; adjusting entries for recording these items involve increasing (debiting) expenses and increasing (crediting) liabilities.
Accrued revenues	Revenues earned in a period that are both unrecorded and not yet received in cash; adjusting entries for recording these items involve increasing (debiting) assets and increasing (crediting) revenues.
Adjusted trial balance	List of accounts and balances prepared after adjustments are recorded and posted to the ledger.
Adjusting entry	Journal entry at the end of an accounting period to bring an asset or liability account to its proper amount while also updating the related revenue or expense account.
Annual financial statements	Financial statements covering a one-year period; often based on a calendar year, but any twelve consecutive month period is acceptable.
Book value	Equals the assets original cost less its accumulated depreciation.
Cash basis accounting	Revenues are recognized when cash is received and expenses when cash is paid.
Contra account	Account linked with another account and having the opposite normal balance; reported as a subtraction from the other account's balance.
Depreciation	Expense created by allocating the cost of plant and equipment to the periods in which they are used; represents the expense of using the assets.
Fiscal year	consecutive 12 months (or 52 weeks) chosen as an organization's annual accounting period.
Interim financial statements	Financial statements covering periods of less than one year; usually based on one- or three- or six-month periods.
Expense recognition (or matching) principle	Requires expenses to be recorded in the same period as the revenues that were earned as result of the expenses.
Natural business year	12-month period that eneds when a company's sales activities are at their lowest point.
Plant assets	Tangible long-lived assets used to produce or sell products and services; also called plant assets or fixed assets.
Prepaid expenses	Items paid for in advance of receiving their benefits; classified as assets.
Profit margin	Ratio of a company's net income to its revenues; measures the portion of profit in each dollar of revenue.
Straight-line depreciation method	Allocates equal amounts of an asset's cost to depreciation expense during its useful life.
Time-period principle	Assumes activities of an organization can be divided into specific time periods such as months, quarters, or years.
Unadjusted trial balance	List of accounts and balances prepared before adjustments have been recorded and posted.
Unearned revenues	Cash received in advance of providing products or services; a liability.

Created by: DarciEven

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