Financial & Managerial Accounting Chapter 3
accumulated depreciation
The contra asset account credited when recording the depreciation of a fixed asset.
adjusting entries
The journal entries that bring the accounts up to date at the end of the accounting period.
matching concept (or matching principle)
A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses.
contra account (or contra asset account)
An account offset against another account.
adjusting process
An analysis and updating of the accounts when financial statements are prepared.
accrued expenses
Expenses that have happened but not recorded (still need to pay)
prepaid expenses
Items such as supplies that will be used in the business in the future.
fixed assets (or plant assets)
Longterm or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.
accrued revenues
Revenues that have been earned but not recorded
revenue recognition concept
The accounting concept that supports reporting revenues when the services are provided to customers.
depreciation expense
The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.
depreciation
The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.
adjusted trial balance
The trial balance prepared after all the adjusting entries have been posted.
depreciate
To lose usefulness as all fixed assets except land do.
deferred revenues
initially recorded as a liability but are expected to become revenue
cash basis of accounting
Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which cash is received or paid.
accrual basis of accounting
Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which they are earned.
accrued revenues
accounts receivable
accrued expenses
accrued wages
accrued expenses
aka accrued liability
deferred expenses
aka prepaid expenses
deferred revenues
aka unearned revenues
deferred expenses
prepaid insurance and supplies
deferred expenses
recorded as assets but will become expenses
accounting period concept
requires that revenues and expenses be reported in the proper period
deferred revenues
unearned rent and tuition