Chapter 3 Accounting

Depreciation

The decrease in the ability of a fixed asset to provide useful services.

Book value of the Asset

The difference between the cost of a fixed asset and its accumulated depreciation

Adjusting Entries

The journal entires that bring the accounts up to date at the end of the accounting period.

Depreciation Expense

The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life

Adjusting Process

An analysis and updating of the accounts when financial statements are prepared.

Vertical Analysis

Comparing each item in a financial statement with a total amount from the same statement.

Accrued Expenses

Expenses that have been incurred but not recorded in the accounts.

Prepaid Expenses

Items that have been recorded as assets but are expected become expenses over time or through normal operations of a business.

Unearned Revenues

Items that have been recored as liabilities but are expected to become revenues over time or through normal operations of a business.

Fixed Assets

Physical resources that are owned and used by a business and are permanent or have a long life.

Accrued Revenues

Revenues that have been earned but not recorded in the accounts

Matching Concept

The acc concept that supports reporting revenues and related expenses in the same period

Accounting Period Concept

The accounting concept that assumes that the economic life of the business can be divided into time periods.

Revenue Recognition Process

The accounting concept that supports reporting revenues when the services are provided to customers.

Accumulation Depreciation

The asset account credited when recording the depreciation of a fixed asset

Adjusted Trial Balance

The trial balance prepared after all the adjusted entries have been posted

Accrual Basis

Under this basis of acc, revenues are reported in the income statement in the period in which they are earned.

Cash Basis

Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which cash is received or paid.