Ch. 5 Adjusting Entries

An account with a credit balance that is deducted from the related asset account on the balance sheet is known as

Contra-Asset

Assets of a durable nature that will be used for operations over several years (i.e., buildings and equipment) are known as

Plant Asset

A method of accounting under which revenues are recorded when earned and expenses are recorded when incurred is known as

Accrual Basis

Journal entries made at the end of an accounting period to reflect changes in account balances that are not the direct result of an exchange with an outside party are known as

Adjusting Entries

The difference between the asset account and its related accumulated depreciation account (i.e., the value reflected by the accounting records) is known as

Book Value

A method of accounting under which revenues are recorded when cash is received and expenses are recorded when cash is paid is known as

Cash Basis

An account with a debit balance that is deducted from the related liability on the balance sheet is known as

Contra-Liability

The cost of an asset that is subject to depreciation is known as

Depreciable Cost

A method of matching an asset's original cost against the revenues produced over its useful life is known as

Depreciation

A 12-month period for which financial reports are prepared is known as

Fiscal Year

A principle that requires assets to be recorded at their actual cost is known as

Historical Cost Principle

The amount an item can be sold for under normal economic conditions is known as

Market Value

A principle that requires the matching of revenues earned during an accounting period with the expenses incurred to produce the revenues is known as

Matching Principle.

A method of accounting that combines aspects of the cash and accrual methods (i.e., it uses the cash basis for recording revenues and most expenses with exceptions made when cash is paid for assets with useful lives greater than one accounting period) is known as

Modified Cash Basis

A principle that states that revenues should be recognized when earned regardless of when cash is received from the customer is known as

Revenue Recognition Principle

The expected market value of an asset at the end of its useful life is known as

Salvage Value

A depreciation method in which the depreciation cost is divided by the estimated useful life is known as

Straight-Line Method

The difference between the asset account and its related accumulated depreciation (a.k.a. book value) is known as

Undepreciated Cost

The period of time that an asset is expected to help produce revenues is known as

Useful Life