Chapter 4 GLOSSARY REVIEW Flashcards
(22 cards)
What is the adjusted trial balance?
A list of accounts and their balances after all adjustments have been made.
What is adjusting entries?
Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.
What is book value?
The difference between the cost of a depreciable asset and its related accumulated depreciation.
What is cash-basis accounting?
Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.
What are the closing entries?
Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders’ equity account, Retained Earnings.
What is the contra asset account?
An account that is offset against an asset account on the balance sheet.
What is depreciation?
The process of allocating the cost of an asset to expense over its useful life.
What is earnings management?
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.
What is the expense recognition principle or the (matching principle)?
The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.
What is the fiscal year?
An accounting period that is one year long.
What is the income summary?
A temporary account used in closing revenue and expense accounts.
What is a worksheet?
A multiple-column form that companies may use in the adjustment process and in preparing financial statements.
What is the useful life?
The length of service of a productive asset.
What are unearned revenues?
Cash received and a liability recorded before services are performed.
What are the temporary accounts?
Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period.
What is a reversing entry?
An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.
What is the revenue recognition principle?
The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.
What is the quality of earnings?
Indicates the level of full and transparent information that a company provides to users of its financial statements.
What are prepaid expenses or (prepayments)?
Expenses paid in cash before they are used or consumed.
What is the post-closing trial balance?
A list of permanent accounts and their balances after a company has journalized and posted closing entries.
What are the permanent accounts?
Balance sheet accounts whose balances are carried forward to the next accounting period.
What is the periodicity assumption?
An assumption that the economic life of a business can be divided into artificial time periods.
