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AcctCh3

Dual-Credit Accounting Chapter 3

TermDefinition
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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