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