Flashcards in CH3 - The Adjusting Process Deck (20):
The accounting concept that assumes that the economic life of the business can be divided into time periods.
accounting period concept
Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which they are earned or incurred.
accrual basis of accounting
Expenses that have been incurred but not recorded in the accounts.
Revenues that have been earned but not recorded in the accounts.
The contra asset account credited when recording the depreciation of a fixed asset.
The trial balance prepared after all the adjusting entries have been posted.
adjusted trial balance
The journal entries that bring the accounts up to date at the end of the accounting period.
An analysis and updating of the accounts when financial statements are prepared.
The difference between the cost of a fixed asset and its accumulated depreciation
book value of the asset (or net book value)
Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which cash is received or paid.
cash basis of accounting
An account offset against another account.
contra accounts (or contra asset accounts)
To lose usefulness as all fixed assets except land do.
The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.
The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.
Long-term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.
fixed assets (or plant assets)
A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses.
matching concept (or matching principle)
Items such as supplies that will be used in the business in the future.
The accounting concept that supports reporting revenues when the services are provided to customers.
revenue recognition concept
The liability created by receiving revenue in advance.