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Flashcards in Chapter 3 Vocabulary Deck (20):
1

accounting period concept

The accounting concept that assumes that the economic life of the business can be divided into time periods.

2

accrual basis of accounting

Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which they are earned or incurred.

3

accrued expenses

Expenses that have been incurred but not recorded in the accounts.

4

accrued revenues

Revenues that have been earned but not recorded in the accounts.

5

Accumulated Depreciation

The contra asset account credited when recording the depreciation of a fixed asset.

6

adjusted trial balance

The trial balance prepared after all the adjusting entries have been posted.

7

adjusting entries

The journal entries that bring the accounts up to date at the end of the accounting period.

8

adjusting process

An analysis and updating of the accounts when financial statements are prepared.

9

book value of the asset

The cost of a fixed asset minus accumulated depreciation on the asset.

10

cash basis of accounting

Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which cash is received or paid.

11

contra accounts

A management approach that is part of the overall total quality management philosophy. The approach requires all employees to constantly improve processes of which they are a part or for which they have managerial responsibility.

12

depreciate

To lose usefulness as all fixed assets except land do.

13

depreciation

The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.

14

depreciation expense

The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.

15

fixed assets

The number of dollars of sales that are generated from each dollar of average fixed assets during the year, computed by dividing the net sales by the average net fixed assets.

16

matching concept

The comprehensive budget plan linking all the individual budgets related to sales, cost of goods sold, operating expenses, projects, capital expenditures, and cash.

17

prepaid expenses

Items such as supplies that will be used in the business in the future.

18

revenue recognition concept

The concept that supports recording revenues when services have been performed or products delivered to customers.

19

unearned revenues

The liability created by receiving revenue in advance.

20

vertical analysis

An analysis that compares each item in a current statement with a total amount within the same statement.