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Accounting ch 5

College Accounting ch 5

QuestionAnswer
Accrual Basis Accounting A method of accounting under which revenues are recorded when earned and expenses are recorded when incurred.
Adjusted Trial Balance Columns The third pair of amount columns on the work sheet. They are used to prove the equality of the debits and credits in the general ledger accounts after making all end-of-period adjustments.
Adjusting Entries Journal entries made at the end of an accounting period to reflect changes in account balances that are not the direct result of ank exchange with an outside party.o
Balance Sheet Columns The work sheet columns that show the amounts that will be reported in the balance sheet and the statement of owner's equity.
Book Value The difference between the asset account and it's related accumulated depreciation account. The value reflected by the accounting records.
Cash Basis of Accounting A method of accounting under which revenues are recorded when cash is received and expenses are recorded when cash is paid.
Contra-Asset An account with a credit balance that is deducted from the related asset account on the balance sheet.
Depreciable Cost The cost of an asset that is subject to depreciation.
Depreciation A method of matching an asset's original cost against the revenues produced over it's useful life.
Fiscal Year A 12-month period for which financial reports are prepared.
Historical Cost Principle A principle that requires assets to be recorded at their actual cost.
Income Statement Columns The work sheet columns that show the amounts that will be reported in the income statement.
Market Value The amount an item can be sold for under normal economic conditions.
Matching Principle A principle that requires the matching of revenues earned during an accounting period with the expenses incurred to produce the revenues.
Modified Cash Basis A method of accounting that combines aspects of the cash and accrual methods. It uses the cash basis for recording revenues and most expenses. Exceptions are made wghen cash is paid for assets with useful lives greater than one accounting period.
Plant Assets Assets of a durable nature that will be used for operations over several years. Examples include buildings and equipment.
Salvage Value The expected market value of an asset at the end of it's useful life.
Straight-Line Method A depreciation method in which the depreciable cost is divided by the estimated useful life.
Undepreciated Cost The difference between the asset account and its related accumulated depreciation account. Also known as book value.
Useful Life The period of time that an asset is expected to be help produce revenues.
Work Sheet A form used to put together all of the information needed to entrusting entries and prepare the financial statements.
Created by: dengler