Financial Accounting chapter 3

Accounting that recognizes a business transaction when it occurs, whether or not cash is received or disbursed

Revenues earned or expenses incurred before cash has been exchange

Journal entries made at the end of the accounting period to measure the periods income accurately and bring the related asset and liability accounts to correct balance before the financial statements are prepared.

Accounting that records translations only when cash is received or paid

Cash received or paid before revenue has been earned or expenses have been incurred.

Any consecutive year

Recording expenses in the time period they were incurred to produces revenues, thus matching them against the revenues earned during that same period.

Recording revenues when they are earned by providing goods or services to customers

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

A contra asset account representing the total depreciation taken to date.

Cost – Accumulated Depreciation

asset’s cost- its accumulated depreciation

An account that is linked to another account. A contraacount will have a normal balance opposite of the account it is linked to

Amount that are assets of a business because they represent items which have been paid for but will be used later.

A liability created when a business collects cash from customers in advance of providing goods or services

Allocation of the cost of a long-term asset to expenses over its useful life

plant assets: Property, Plant, Equipment, Land, Buildings, Furniture and Fixtures lasting more than 2 years

The amount found by subtracting the balance of a contra-account from the balance of the account it is linked to

Expenses paid in advance of their use

The estimated value of a long-term asset at the end of its useful life

a method of estimating depreciation (cost of the asset-salvage value)/useful life of the asset

a trail balance that is prepared at the end of the accounting period prior to the adjusting entries being made

A liability created when a business collects cash from customers in advance of providing goods or services

a list of all the accounts of a business with their adjusted balance

Journal entries that prepared at the end of the accounting period. closing entries zero out the revenue, expenses, and divided accounts so accounting can begin for the next period

The asset, liability, common stock and retained earnings accounts, theses account are not closed at the end of the accounting period

a list of the accounts and their balances at the end of the accounting period after closing entries have been journalizd and posted

The revenue, expenses, and dividend accounts; theses account are closed at the end of the accounting period

states that a revenue should be recorded when a resource has been earned.

updating the account at the end of the accounitng period period

Deferrals and accruals

liability