accounting ch. 3 vocab
deferral, unearned revenue
occurs when cash related to a future revenue or expense has revenues, it is initially recorded as a liability called ______
accruals
occurs when revenue has been earned or an expense has been incurred but not recorded
fixed assets/ plant assets
physical resources that are owned and used by a business and are permanent or have a long life
revenue recognition principle
revenues are recorded when services have been performed or products have been delivered to customers
adjusting process
the analysis and updating of accounts at the end of the period before the financial statements are prepared
Expense recognition principle (matching principle)
the expenses incurred in generating revenue must be reported in the same period as the related revenue
adjusting entries
the journal entries that bring the accounts up to date at the end of the accounting period
revenue recognition
the process of recognizing revenues
cash basis of accounting
when revenues and expenses are reported on the income statement in the period in which cash is received or paid
accrual basis of accounting
when revenues and their related expenses are reported on the income statement in the period in which a service has been performed or a product has been delivered