CH 4 acct

adjusted trial balance

a list of accounts and their balances after all adjustments have been made

post closing trial balance

a list of permanent accounts and their balances after a company has journalized and posted closing entries

worksheet

a multiple column form that companies may use in the adjustment process and in the preparing financial statements

income summary

a temporary account used in closing revenue and expense accounts

adjusting entries

entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles

accrued expenses

expenses incurred but not yet paid in cash recorded

prepaid expenses (prepayments)

expenses paid in cash before they are used or consumed

quality of earnings

indicates the level of full and transparent information that a company provides to users of its financial statements

accrued revenues

revenues for services performed but not yet received in cash or recored

book value

the difference between the cost of a epreciabel asset and its related accumulated depreciation

useful life

the length of service of a productive asset

earnings managment

the planed timing of revenues, expenses, gains, and losses to smooth out bumps in net income

revenue recognition priciple

the principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied

expense recognition principle (matching principle)

the principle that matches expenses with revenues in the period when he company makes efforts to generate those revenues

depreciation

the process of allocating the cost of an asset to expense over its useful life.

accrual-basis accounting

accounting basis in which companies record, in the periods in which the events occur; transactions that change a company's financial statements, even if cash was not exchanged

cash basis accounting

accounting in which a company records revenue only when it receives cash and an expense only when it pays cash

contra asset account

an account that is offset against an asset account on the balance sheet

fiscal year

an accounting period that is one year long

periodicity assumption

an assumption that the economic life of a business can be divided into artificial time periods

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.

temporary accounts

an entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.

permanent accoutns

balance sheet accounts whose balances are carried forward to the next accounting period

unearned revenues

cash received and liability recorded before services are performed

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