Time period assumption

A broad principle that requires identifying the activites of a business with specific time periods such as months, quarters, or years.

The length of time covered by a set of periodic financial statements.

Revenue recognition principle

The accounting principle that requires revenue to be recorded when earned.

The time period assumption assumes that an organization's activities can be divided into specific time periods except:

Cash basis accounting

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid.

Accrual basis accounting

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues.

Items that require adjusting entries

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues.

An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account.

Adjusted trial balance

A trial balance prepared after adjustments have been recorded

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ACCT Exam 2

Vocab

Term	Definition
Time period assumption	A broad principle that requires identifying the activites of a business with specific time periods such as months, quarters, or years.
Accounting period	The length of time covered by a set of periodic financial statements.
Revenue recognition principle	The accounting principle that requires revenue to be recorded when earned.
Days	The time period assumption assumes that an organization's activities can be divided into specific time periods except:
Cash basis accounting	The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid.
Accrual basis accounting	The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues.
Items that require adjusting entries	Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues.
Contra account	An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account.
Adjusted trial balance	A trial balance prepared after adjustments have been recorded

Created by: 100000125418871

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