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